RHB estimates Press Metal Aluminium to report an increase in earnings in the second half of 2020

RHB Research expects Press Metal Aluminium Holdings Bhd to deliver a year-over-year growth in core earnings in the second half of 2020 on higher aluminium prices.

Average aluminium prices of averaging US$1,930 per tonne on the London Metal Exchange to fuel the company’s earnings prospects.

"We believe the metal’s price trend is likely to sustain, as we see more headroom for global downstream demand to recover to pre-pandemic levels," RHB analyst Lester Siew said.

"We anticipate sequential core earnings improvement in 2HFY20 (3QFY20F: RM110 million-130 million) in tandem with higher aluminium prices as well as recovery in LME physical premiums and value-added products mix. Subsequently, FY21F is set to mark the transition from recovery to a new growth phase, underpinned by Samalaju’s Phase 3 expansion in January 2021 coupled with the firmer LME forward prices — US$1,930-1,980/tonne average for 2021-22F — which should incentivise management to further hedge its forward sales volume (2021F: c.15% at US$1,950/tonne).”

"FY20-21F earnings [forecast for Press Metal] raised 17%-18%, after revising our commodity price assumptions while ascribing zero Sarawak state sales tax in 2020F given the lack of updates on the proposal. We also pencil in a long-term LME aluminium spot [price] increment of 2% annually (from 1.5% previously).”

RHB also hiked its target price for the company to RM7.10.