Hot Stock Press Metal rises 4% on positive outlook

by **Cals** Fri 09 May 2014, 20:16

Hot Stock Press Metal rises 4% on positive outlook

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Friday, 09 May 2014 10:39

KUALA LUMPUR (May 9): Press Metal Bhd rose as much as 3.7% after an analyst report highlighted several catalysts that will boost the group’s performance this year.
At 10.04am, Press Metal rose seven sen or 2.1% to RM3.35 with some 892,700 shares done. The counter which traded among top gainers on Bursa Malaysia, had earlier risen as much as 12 sen or 3.7% to RM3.40.
Its warrant PMETAL-LA rose 11 sen or 3.4% to RM3.31 with some 52,000 units done.
AmResearch Sdn Bhd wrote in a note that Press Metal was in the early stages of an earnings up-cycle, which will be supported by its improved balance sheet and an upturn in aluminium prices.
Capacity boost from its plants is also expected to support Press Metal's earnings, according to AmResearch.
AmResearch expects strong earnings from Press Metal in its second quarter (2QFY14) for the current financial year ending December 31, 2014. But 1QFY14 earnings could be weak.
“We expect earnings to be slightly subdued as its Mukah plant was still being ramped up while aluminium prices and premiums had yet to increase.
“Notwithstanding, its 2QFY14 earnings onwards will be strong, reflecting a full utilisation rate and improved selling prices,” said AmResearch.
On aluminium prices, the research house forecasts an average premium of
US$250 (RM806)/metric tonne (MT) and an average selling price of
US$1,800/MT for FY14.
The current premium for aluminium, depending on the type of product, stands at around US$150-US$500/MT, while the London Metal Exchange aluminium spot price of US$1,738.75/MT is trading close to the trough level of a four-year cycle.
AmResearch expects aluminium prices to rise, as more than two million MT of aluminium will be cut by 2015.
Besides aluminium prices, the research house noted Press Metal's improved balance sheet, as it aimed to reduce its net gearing to 0.9 times this year. This compares to 1.9 times as at end-FY13.
Moreover, Press Metal stands to benefit from its Mukah and Samalaju plants, which are operating at full capacity.
AmResearch advised investors to accumulate Press Metal shares given the recent retracement in share price.
AmResearch kept its “buy” call on Press Metal, with a target price of RM4.50.