KUALA LUMPUR: Press Metal Aluminium Holdings Bhd’s commissioning of its Samalaju phase three plant coupled with the decade-high aluminium prices are expected to push its earnings to record-high in 2022, according to RHB Research.

       This comes following the below than expected earnings in the financial year (FY) 2021 as the group provisioned the full-year state sales tax into a single quarter.

       According to RHB, although Press Metal’s full-year earnings of RM1.03bil were up 121% year-on-year but they were 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 European Union, which was already scrambling for supplies during the previous heating season.

       “About 810,000 tonnes of regional smelting capacity went offline with 700,000 tonnes more are 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 the research house.

       While the production costs of aluminium have risen with alumina prices jumping 17% year-to-date to US$405 (RM1,702) 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 RM8.25 after accounting for the latest earnings changes and the expiration of the pioneer tax status after 2027.

       Meanwhile, Hong Leong Investment Bank Research (HLIB) expected 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 two Samalaju expansion project.

       It also noted an additional earnings boost from Press Metal’s 25%-owned phase one PT Bintan alumina refinery business.

       “We maintain our ‘buy’ recommendation on Press Metal with a higher target price of RM7.71 per share (from RM7.25 previously) as we roll over our base year to FY23 but peg Press Metal to a lower price-earnings multiple of 20 times (from 25 times), which is at a slight premium to both its seven-year historical mean price-earnings and to the 10 times average forward price-earnings of its global peers,” it said.