KUALA LUMPUR: Press Metal Aluminium Holdings Bhd's commissioning of its Samalaju Phase 3 plant coupled with decade-high aluminium prices is expected to push its earnings to record-high levels in 2022, says RHB Research.

       This comes following below expected earnings in FY21 as the group provisioned the full-year state sales tax into a single quarter.

       According to RHB, Press Metal's full-year earnings of RM1.03bil was up 121% year-on-year but was below its and consensus estimates at 93% and 94% respectively.

       However, it added that the ongoing geopolitical tensions are expected to keep a bullish outlook on the aluminium industry for the coming year.

       "Ongoing conflicts arising from the Ukraine invasion have resulted in higher energy prices in the EU, which was already been scrambling for supplies during the previous heating season.

       "~810,000 tonnes of regional smelting capacity went offline with another 700,000 tonnes at high risk of curtailment, thereby adding further pressure in the deficit market.

       "Additionally, the potential imposition of sanctions on Russian aluminium (largest producer ex-China) are expected to lead to further higher regional premiums and spur restocking activities," said RHB.

       While the productions costs of alminium have risen with alumina prices jumping 17% year-to-date to US$405 a tonne due to rising energy costs and Covid-19 closures, the alumina-aluminium ratio remained favourable at 12%, it added.

       RHB maintained its "buy" call on Press Metal but lowered its target price to R8.25 after accounting for the latest earnings changes and the expiration of the pioneer tax status after 2027.

       Meanwhile, Hong Leong Investment Bank Research (HLIB) expects Press Metal's profits to more than double again in FY22 on the back of soaring aluminium spot prices and increased aluminium sales tonnage boosted by the group's Phase 2 Samalaju expansion project.

       It also noted an additional earnings boost from Press Metal's 25%-owned Phase 1 PT Bintan alumina refinery business.

       "We maintain our BUY recommendation on Press Metal with a higher target price of RM7.71/share (from RM7.25 previously) as we roll over our base year to FY23F but peg Press Metal to a lower P/E multiple of 20x (from 25x), which is at a slight premium to both its seven-year historical mean price-earnings and to the 10x average forward price-earnings of its global peers," it said.