04 NOVEMBER 2013www.thestar.com.my
RHB Research maintains Buy on Press Metal
Edited by : AL CIRCLE
1 min read
RHB Research has maintained its Buy call on Press metal with a higher fair value of RM3.77 from RM2.77 after its recent disposal of the loss-making Hubei smelter via an asset swap in exchange for a profitable extrusion unit.
In a note on Monday, RHB said it lauds Press’ disposal of a 20% stake in Press Metal Bintulu SB (PMB) to Sumitomo for RM444mil.
“This will cut Press’ gearing from 1.74 times to 1.2 times, giving rise to a RM336.4mil disposal gain. However, ongoing repairs at the Mukah smelter and weak aluminium prices may cap its share price.
“The disposal consideration of PMB will be subject to certain adjustments. We are hopeful of a reward of not more than US$21mil upon finalisation of PMB’s FY18 accounts, which take into account certain production costs that are likely within management’s control.
“However, we are mindful of a potential negative earn-out adjustment (penalty) of up to US$16mil based on PMB’s yearly free cash flow (FCF) until end-FY18, as this depends greatly on aluminium prices, which are beyond management’s control,” it said.
It noted while depressed aluminium prices and ongoing repairs at its Mukah smelter are still concerns, these are likely to be temporary.
In a note on Monday, RHB said it lauds Press’ disposal of a 20% stake in Press Metal Bintulu SB (PMB) to Sumitomo for RM444mil.
“This will cut Press’ gearing from 1.74 times to 1.2 times, giving rise to a RM336.4mil disposal gain. However, ongoing repairs at the Mukah smelter and weak aluminium prices may cap its share price.
“The disposal consideration of PMB will be subject to certain adjustments. We are hopeful of a reward of not more than US$21mil upon finalisation of PMB’s FY18 accounts, which take into account certain production costs that are likely within management’s control.
“However, we are mindful of a potential negative earn-out adjustment (penalty) of up to US$16mil based on PMB’s yearly free cash flow (FCF) until end-FY18, as this depends greatly on aluminium prices, which are beyond management’s control,” it said.
It noted while depressed aluminium prices and ongoing repairs at its Mukah smelter are still concerns, these are likely to be temporary.
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