Hot Stock Press Metal rises 5.5% after AmResearch raises its full value by 46.5%

by **Cals** Thu 17 Apr 2014, 01:17

Hot Stock Press Metal rises 5.5% after AmResearch raises its full value by 46.5%

Business & Markets 2014

Written by Ho Wah Foon of theedgemalaysia.com

Wednesday, 16 April 2014 17:29

KUALA LUMPUR (April 16): Press Metal Bhd rose sharply in afternoon trades to grab a spot in the 10 top gainers’ list after AmResearch raised its fair value by 46.5% to RM4.50/share (from RM3.07/share).

The stock emerged 7th top gainer in late trades and its warrant was the 8th top gainer.

Near market close, the stock soared 17 sen or 5.5% to RM3.25 per share on trades of some 4.9 million shares.

Its warrant PMetal-WC also rose in tandem, gaining 17 sen or 13% to RM1.46 per unit.

AmResearch opined Press Metal is in the early stage of an earnings up-cycle. The research house has raised its FY14 core earnings forecast for Press Metal by 55%, FY15 by 20% and FY16 by 15%.

AmResearch said the “strong investability” of Press Metal is on its improved balance sheet, expected lower net gearing by year-end, upturn in aluminium prices and capacity boost following production ramp-up of its two aluminium plants.

In addition, Press Metal’s balance sheet is being bolstered by recent initiatives -- the exit from its loss-making Chinese smelter business and a sale of 20% stake of its Samalaju plant to Sumitomo.

“Provisions have also been made for the shutdown of its Mukah plant last year. As capex has been frontloaded, net gearing will fall to 0.9x this year, and further to 0.5x in FY15F, and 0.4x in FY16F.

“Net debt/EBITDA will also improve from 6.2x last year, to 1.0x by end-FY16F.”

Press Metal is expected to benefit from a global upturn in aluminium prices and premium.

“For the first time in ten years, there will be global supply shortfall due to capacity cuts and rising demand.”

AmResearch also said Press Metal is currently trading at an attractive PE of 8x.

“Despite the recent share price run-up, there is deep valuation given its significant balance sheet improvement,” it said.