Who are the big beneficiaries of the 2021 commodity boom that has inflated prices of edible oil, metals as well as grains and fuels? The shareholders of Press Metal Aluminium Holdings Bhd are certainly among them.
The group’s share price has been on a steady climb after it hit a low of RM1.53 (adjusted price for bonus issue) in March 2020 during the global equity rout sparked off by the Covid-19 pandemic.
The counter has rebounded to its pre-pandemic level and continues to hike new peaks in 2021, buoyed by the sharp rise in aluminium prices, coupled with expectations of strong demand ahead. It leaped to an all-time high of RM6.29 on Oct 15 this year, a 50% jump from RM4.20 as at end-December 2020.
For the period between March 30, 2018, and March 31, 2021, the group’s share price soared from RM2.16 to RM5.06. This translated into a 33.6% three-year compound annual growth rate (CAGR) returns to shareholders, making it the winner of The Edge Billion Ringgit Club’s Highest Returns to Shareholders among big cap companies, whose market capitalisation is between RM10 billion and RM40 billion.
Besides the big leap in share price, Press Metal shareholders have also been receiving dividend cheques continuously. The group declared a dividend per share of 3.2 sen for the financial year ended Dec 31, 2018 (FY2018), 2.6 sen for FY2019 and 2.1 sen for FY2020.
Press Metal has always struck a balance between expansion investments for future growth and dividend payouts for shareholder reward.
It is the largest aluminium producer in Asean with a total annual production capacity of 760,000 tonnes for its smelting segment and 210,000 tonnes for its extrusion segment.
This year, Press Metal’s smelting capacity will be expanded by 320,000 tonnes when its new Phase 3 Samalaju smelter in Bintulu reaches full capacity, bringing its total smelting capacity to 1.08 million tonnes.
Press Metal has two smelting plants in Sarawak — in Mukah and Bintulu — from which it exports over 85% of its smelting products, including to Vietnam (17.6%), South Korea (15.9%), China (8.5%) and Europe (8.3%). At home, it has a market share of about 37.7%.
In the first six months ended June 30, 2021, Press Metal achieved a nearly 140% surge in net profit to RM461.3 million from RM192.63 million in the previous corresponding period, after experiencing a slight fall in earnings in FY2020.
“Moving forward to 2022, we will be on a stronger footing with higher production volume from Phase 3, healthy aluminium prices and the anticipated economic rebuilding,” it said of its business outlook next year.
Year to date, aluminium prices have averaged at US$2,398/tonne and it last chalked up to US$2,915/tonne. The price of the metal has recovered from a low of US$1,465/tonne in April 2020.
HLIB Research remains upbeat about Press Metal’s earnings prospects in the next 12 to 18 months on the back of soaring London Metal Exchange aluminium spot prices; the progressive ramping up of the group’s Phase 3 Samalaju expansion project; and an additional earnings boost from its 25%-owned PT Bintan Alumina Indonesia refinery (Phase 2), which is targeted to be fully commissioned by 1HFY2022.
“We are expecting a sustained bull run in global aluminium prices over the next 12 to 18 months with the synchronised decarbonising movements to achieve net zero carbon emission and the general recovery post-pandemic across most countries.
“We envision the world at large entering an aluminium deficit in 2022/23, in which demand would severely outstrip supply globally,” HLIB Research says in an Oct 7 research note.
The research house highlights that Press Metal deserves a premium in its valuations to reflect its favourable cost structure as the bulk of its energy costs are locked in via a 15- to 25-year power purchase agreement with Sarawak Energy Bhd; as well as its low carbon footprint as its smelters are hydro powered, making its environmental, social and governance profile more favourable to investors.
Meanwhile, RHB Research believes that the introduction of a one-off windfall tax in Budget 2022 is unlikely to have a pertinent impact on Press Metal going into 2022, given the ongoing pioneer status tax holiday for its primary smelting hub in Samalaju.