KUALA LUMPUR (Sep 9): Press Metals Bhd (PMetal) shares were among top gainers in early trades today following a report that said aluminium price recovery would be a catalyst for the firm.
At 9:57 am, shares of the aluminium manufacturer rose 13 sen or 1.78% to RM7.42 with some 215,300 shares traded.
Its warrant, PMetal-WC rose 14 sen or 2.77% with 85,300 shares traded.
A report by Kenanga IB Research said PMetal was well positioned to ride on the aluminium price recovery in the auto industry.
“We believe PMetal should benefit directly from the higher price trend as 97% of revenue is derived from its Manufacturing & Trading (M&T) division, which sells aluminum ingots, billets and extrusion products,” the report said.
The research house computed that every US$100 (RM318) per metric tonne (MT) increase in aluminium prices would directly translate into a 5% increase in PMetal’s bottom line.
On the company’s revenue, Kenanga expects a 25% surge from capacity expansion to RM3.9billion in FY14E.
"PMetal has continued to ramp up production at the Samalaju plant by 33% to its full rated capacity of 320k MT/year of aluminum production. We expect the newly-added capacity to boost revenue immediately,” it said.
The research house has a "buy” call on the company with a target price (TP) of RM8.87 per share based on a forward price earnings of 14.5 times FY15 earnings per share of 61 sen.
“At our current TP, we expect a potential total return of 24.1% (21.7% upside, 2.5% dividend yield) which warrants a trading buy recommendation,” said Kenanga.