KUALA LUMPUR (Aug 17): The largest integrated aluminium producer in Southeast Asia Press Metal Aluminium Holdings Bhd’s share price increased 0.91% in the morning trading session, following the release of a good set of quarterly earnings that beat market expectation yesterday.

The stock, which rebounded from a recent low of RM1.70 since the start of the year, continued its climb to a high of RM3.36, shortly after the opening bell.

Press Metal closed at RM3.29 yesterday, compared with its recent trough at RM1.39 on Sept 7 last year.

At 11.55am, Press Metal was up three sen or 0.91% to RM3.32, with 9.88 million shares exchanging hands, for a market capitalisation of RM12.47 billion.

Press Metal’s net profit of RM150.17 million for the second financial quarter ended June 30, 2017 (2QFY17) was up 2.8%, from RM146.07 million in 2QFY16, driven by a higher revenue.

Quarterly revenue surged 31% to RM2.08 billion, from RM1.59 billion a year ago. Press Metal declared an interim dividend of 1.5 sen per share, to be paid on Sept 20. The ex-date for the dividend is Aug 30.

For the first half of FY17 (1HFY17), Press Metal achieved a record-high net profit of RM298.22 million, an increase of nearly 24% from RM240.63 million a year ago.

Revenue for 1HFY17 jumped 42.6% to RM4.1 billion, from RM2.88 billion in 1HFY16.

In its result review note, RHB Research commented since Press Metal is the largest client for Sarawak Energy, it remains in a strong position to renegotiate a favourable tariff, after the expiry of the current 20-year power purchase agreement (PPA).

It forecasts Press Metal’s profitability to improve in the coming quarters.

“We deem the results to be in line with our and consensus projections. We make no changes to our estimates,” said the research house analyst Muhammad Syafiq Mohd Salam.

He said the key risks include lower aluminium prices that could hurt profitability and investor sentiment towards the counter, while unexpected power supply interruptions at its smelting plant may damage machinery and disrupt operations.

Muhammad Syafiq retained RHB’s “buy” call on Press Metal shares, with a higher target price of RM3.88, from RM3.66.

“We continue to like the company and maintain our buy recommendation. 

"However our DCF-derived TP is revised up to RM3.88, after factoring in 0% terminal growth (from -2%),” Muhammad Syafiq said.

However, he still sees room for earnings upside, although all pots are operating at full capacity.

Among key drivers include potential cost savings derived from the new smelter commissioned last year, as it shares common infrastructure with room to lower power usage and commissioning of Samalaju Port (capable of handling Panamax vessels) scheduled for July, which would help to cut inland logistics and shipping costs.