P.A. Resources Bhd emerges as top pick for growth, backed by Rakuten Trade

According to an analysis conducted by Rakuten Trade, Malaysia's top aluminium extrusion and fabrication company, P.A. Resources Bhd, is poised for sustained earnings expansion over the next several years.

This growth trajectory is expected to be fuelled by various factors, including a significant RM1.08 billion contract obtained from First Solar, the imminent completion of a new plant that will substantially increase the group's extrusion capacity, enabling greater customer and product variety, as well as the possibility of enhanced margins through operational streamlining.

Rakuten Trade is Malaysia's first online equities broker offering innovative digital investment opportunities to investors.

The company has recently successfully expanded its extrusion capacity from 2,600 to 3,200 tonnes per month. This increased capacity is anticipated to be fully utilised by April 2024, coinciding with the company's endeavour on the RM1.08 billion solar contract. Consequently, the brokerage firm expresses heightened confidence in the company's earnings growth for the financial year 2025 (FY25).

Rakuten Trade commented, "We remain optimistic about the company's prospects, given First Solar's plans to double its manufacturing capacity by 2026 to address its outstanding backlog of 80 gigawatts until 2030.

"Given its initiatives to establish a robust track record with a multinational customer, upgrade existing production lines, and add new production lines over the years, we foresee possible margin expansion beyond the conservative 7 per cent in the company's guidance at the net level, simply from economies of scale. This is a commendable margin given the nature of its manufacturing business."

The trading house stated that P.A. Resources is in a favourable financial position. It boasts a net cash balance of RM46 million and demonstrates robust cash flow generation abilities to support forthcoming capital expenditures. The company is well-equipped to finance its expansion endeavours with internal funds and bank borrowings.

The brokerage foresees a net gearing ratio of 0.27 times by the fiscal year 2025, reflecting the company's prudent financial management amidst its growth trajectory. Dividend projections indicate payouts of 0.7 sen and 1.1 sen for fiscal years 2024 and 2025, respectively, yielding 2 per cent and 3.2 per cent returns, respectively.