#Hot Stock* Press Metal rises 3% on higher aluminium prices

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KUALA LUMPUR (Aug 28): Press Metal Bhd rose as much as 16 sen or 2.6% to RM6.43 before reducing gains. The share price of the aluminium extruder has been rising steadily on rising aluminium prices.

At 12.30pm, Press Metal settled at RM6.42, with some 1.4 million shares done. The stock was the sixth-largest gainer across the exchange.

The stock has more than tripled in share price, from about RM2 a year ago.

According to Bloomberg data, London Metal Exchange global aluminium prices have risen to US$2,085.50 (RM6,563) a tonne yesterday, from US$1,668.50 on March 20 this year.

Max Koh, analyst from AmResearch Sdn Bhd, told theedgemalaysia.com over the phone that the market "is buying into the strong macro global fundamentals of the aluminium industry, of which Press Metal is a beneficiary."

Press Metal's financials have improved. For the six months ended June 30, 2014, net profit rose 94.5% year-on-year to RM88.1 million, while revenue grew to RM1.9 billion.

RHB Research Institute Sdn Bhd wrote in a note dated July 31 this year that the firm gave a higher fair value of RM7.38 on Press Metal shares, while reiterating its “buy” call on the stock.

“We prudently revise upwards our all-in FY14/FY15 aluminium price estimates to US$2,200/US$2,400 respectively, despite the belief that there is more upside coming,” said RHB.

RHB said it continued to witness improving fundamentals in the global aluminium industry (excluding China) due to capacity being curtailed over the past few years, moderate demand growth, driven mainly by higher aluminium usage in the automotive industry and the absence of new smelting capacity outside China.

“This may translate into a supply deficit in the global market (ex-China) from 2014 onwards — a development that is favourable for aluminium prices,” RHB said.