Following a sharp fall from RM5.44 on 22 April 2022 to the trough of RM1.28 in mid-October this year, Malaysia Smelting Corporation consolidated in a sideway channel before staging a breakout and pulled away from the resistance line before closing at RM1.69 on 5 December.
Riding on the bullish indicators, Kenanga notes that the stock could climb toward the resistance targets of RM1.86 a 10% upside potential, and RM2.03 a 20% upside potential). The research house has set a stop-loss price level of RM1.52 (representing a 10% downside risk). As a global integrated tin mining and smelting group, MSC is a proxy for soaring tin prices. Global tin prices have jumped 33% since the beginning of November this year to USD23,500/MT currently in tandem with the recovery demand for tin following China easing of its zero-Covid policy and gradually reopening its borders.
With exposure covering both the upstream (i.e., tin mining) and downstream (namely tin smelting) activities of the tin value
chain, the group saw its bottom line sink to losses of RM31m in 3QFY22 (-179% QoQ) in tandem with the sharp fall of the tin price that stretches back to a peak of USD50,000/MT in March 2022 to as low as USD20,750/MT on end of September this year which then brought its cumulative net profit to RM72.5m for 9MFY22.
Kenanga adds its consensus is projecting the MSC to record a net profit of RM87.6m in FY December 2022 and RM87.9m in FY December 2023, and it translates to forward PERs of 8.1x for both this and next year, respectively.
