RHB Research has maintained a “Buy” recommendation for Press Metal Aluminium Holdings Bhd (PMAH) with a target price of RM8 and an upside for the stock by 44%. It said that it still favours PMAH buoyant FY21-23F growth prospects (3-year earnings CAGR of 77%) and commendable ESG standing as a low-carbon, sustainability-focused aluminium producer.
RHB said that the stock sentiment is likely to remain positive, driven by constructive LME aluminium market trends, while trading below its historical 27x 5-year mean P/E.
RHB said that broadly, management expects the buoyant external environment (supply-side reforms/rising aluminium consumption) to sustain aluminium price trends.
“Demand is currently seen as the more pertinent variable, as supply is expected to be well-contained, particularly within China, “RHB said.
It stated that, despite potential market disruptions such as the coup in bauxite-producing Guinea, management believes the overall situation is still manageable at this time.
RHB said that compared to the 2017-2018 alumina market supply disruptions, PMAH is now in a more secure position, given the offtake agreements tied to its recent investments in Worsley Alumina and the upstart Bintan Alumina Indonesia.
RHB said that key downside risks include a sharp deterioration in global economic conditions, spike in raw material costs, and unforeseen setbacks in commissioning its Phase 3 Samalaju smelter and Bintan alumina refinery.