PETALING JAYA: Malaysia Smelting Corp Bhd (MSC) appears to be fairly priced in all the positive catalysts, with its share price surging over 60% year to-date buoyed by the current strong tin prices.
Kenanga Research, in its recent report, has placed MSC on its radar given the group’s investment merits.
MSC is in the midst of relocating and fully commissioning its new smelting plant in Pulau Indah, Selangor as well as re-developing the site of its old smelting plant in Butterworth, Penang into a mixed residential and commercial property project.
MSC is the world’s third-largest tin supplier as well as the world’s largest toll smelter, which smelts third-party tin concentrates.
On the group’s investment merits, Kenanga Research described the new smelting plant as a game changer, of which the MSC management had indicated cost savings of about 30% once it is fully commissioned with 60,000 tonnes per year by end of this year or early next year compared with the plant in Butterworth.
The group will also be unlocking the value of its Butterworth land.
The research firm said MSC has made efforts to improve its environmental, social and governance rating, such as the new smelting plant having green energy efficiency initiatives while its tin mining operation is powered by 1.0MW hydro energy.
According to Kenanga Research, the new smelting plant’s efficiency is expected to lead to MSC’s earnings growth.
“Tin prices have continued to trend upward solidly, rising by 73% year to date to an all-time-high of above US$35,000 (RM145,523) per tonne currently.
“As such, we have assumed average tin prices of US$27,000 (RM112,261) for financial year 2021 (FY21) with a similar production volume of 23,000 tonnes as last year. This will almost triple MSC’s FY21 net profit forecast to RM58.4mil,” it said.
MSC’s production volume will also rise to 25,000 tonnes in FY22 and 27,000 tonnes in FY23 from 23,000 tonnes in FY21.
The research house has forecast MSC’s net profit at RM71.9mil in FY22 and RM89.5mil in FY23, respectively.