RHB Research maintains Buy on Malaysia Smelting Corp, cuts target price to RM3.88

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KUALA LUMPUR (Nov 11): RHB Research has maintained its Buy rating on Malaysia Smelting Corporation Bhd (MSC) at RM3.18 with alower target price (TP) of RM3.88 (from RM4.20) and said MSC’s 9M14 core profit of RM44 million represented 80% of house full-year projection, but not deemed below house estimates as the research house expects a weaker 4Q.

In a note Tuesday, the research house said following a loss from the disposal of PT Koba Tin, an impairment of receivables and a full provision for financial guarantee in 1H, it was hopeful that the company may move to a new chapter going forward.

RHB Research said tin production remains constrained in key tin-producing countries globally, save for China, where it said production growth should moderate over the next few years.

The research house said that on the demand side, global semiconductor sales and China’s semiconductor production are rising due to growing use of solders in electronics.

Therefore, it said tin market fundamentals are likely to remain healthy in the medium term, supported by limited supply.

“However, we decided to trim our tin price assumptions to USD22,169/ USD22,750/USD23,500 a tonne for 2014/2015/2016, following the broad weakness in the commodity market.

“Accordingly, we trim our earnings estimates by 7.2%/7.8% for FY14/FY15 and introduce our FY16 projection.

“Maintain Buy with a lower TP of RM3.88 (22% upside),” it said.