KUCHING: Press Metal Bhd’s (Press Metal) earnings is expected to rise further as the company benefits from lower effective tax rate, higher turnover as well as better average aluminium prices realised.
Following a company visit, RHB Research Institute Sdn Bhd (RHB Research) said the aluminium products manufacturer has contracted most of its 2015 sales of which sales order of ingots could potentially double for this year.
Press Metal is also enjoying a lower effective tax rate from its earlier estimate, thus giving a boost to the company’s future earnings.
At the same time, the upward trend of global aluminium prices as a result of supply deficit will provide support to enhance Press Metal earnings for financial year 2015 (FY15).
Hence, RHB Research raised its earnings projection for Press Metal for FY15 by 11.3 per cent and is positive on the company’s prospects as it has recently proposed a bonus issue to improve the liquidity of the company’s shares price.
On another note, AmResearch Sdn Bhd (AmResearch) said Press Metal’s early conversion of 95.7 million of redeemable convertible secured loan stocks (RCSLS) will result in interest savings of RM12.6 million while the enlarged share base will reduce the company’s net gearing.
To recall, Press Metal in a Bursa Malaysia filing on October 29 said its major shareholder Alpha Milestone Sdn Bhd (Alpha Milestone) and persons-acting-in-concert (PACs) are looking to convert all their outstanding RM210.5 million eight-year six per cent RCSLS.
The aluminium products manufacturer said the PACs are its group chief executive officer Datuk Koon Poh Keong, executive vice chairman Koon Poh Ming and their respective spouses.
Besides that, the company added Alpha Milestone and the PACs seek an exemption from undertaking a mandatory general offer for the remaining Press Metal shares and convertible securities not owned by them.
Meanwhile, based on calculation, AmResearch said the best case scenario will witness the shareholders’ stake in Press Metal increasing from 40.6 per cent to 49.44 per cent.
Additionally, Press Metal’s share base will also increase from 549 million shares as at September 29 to 1.289 billion after the company’s one-for-one bonus issue.
In the meantime, Press Metal which released its third quarter 2014 (3Q14) financial results ended September posted a net profit of RM82.65 million from a loss of RM1.65 million in 3Q13.
For the nine months of 2014 (9M14), Press Metal’s earnings surged 291 per cent year-on-year (y-o-y) to RM170.71 million from RM43.64 million for 9M13.
RHB Research explained that the higher profit achieved was a result of higher average aluminium prices realised.
As for Press Metal’s turnover, the company observed that its revenue for 3Q14 gained 29 per cent y-o-y to RM1.03 billion while sales for 9M14 rose 26 per cent y-o-y to RM2.93 billion.
AmResearch noted that Press Metal’s higher revenue generated for 9M14 was attributed to higher metal selling prices in particular aluminium premium as well as full contributions from the company’s two plants in Mukah and Bintulu that were running at full capacity.
Going forward, the research firm expects higher contributions for Press Metal’s turnover and earnings for 4Q14 supported by higher global demand for aluminium products and favourable aluminium selling prices.