OM Holdings 4Q23 Production Output Rises, Malacca Securities Issues Buy Call With Higher Target Price

Om Holdings Limited (OMH) 4Q23 production output for FeSi stood at 40,635 tonnes (+18% YoY,  +3%) QoQ as compared to 39,296 in 3Q23 and 34,332 in 4Q22.

Meanwhile, Manganese alloys which include silicomanganese (SiMn) and high carbon  ferromanganese (HCFeMn) production registered at 84,571 tonnes (+104% YoY, – 3% QoQ), Malacca Securities (M+ Online) said in a note today (Feb 2). 

Sales – In 4Q23, a total of 43,346 tonnes (+4% YoY, +26% QoQ) of FeSi and 113,585  tonnes (+115% YoY, +68% QoQ) of manganese alloys were sold. The sales increase  was due to shipments carried forward from previous quarter.

Furnaces conditions – One FeSi furnace began hot commissioning and performance  testing at end-Dec 2023, bringing the total operational FeSi furnaces to 8 units. 

Meanwhile, 14 out of the 16 furnaces have undergone and completed major  maintenance, of which 12 furnaces have passed hot commissioning and  performance testing. One manganese alloy furnace’s hot commissioning has been  extended due to the furnace not performing as per contract requirements. Two FeSi furnaces are scheduled to commence major maintenance in 2025.

Silicon metal project – Fabricated equipment for the silicon metal conversion  project has been delivered on site, and the replacement works have commenced in  the mid-Jan 2024, and are targeted to be completed by the end-Feb 2024. Both  silicon metal furnaces are producing FeSi to maximise furnace utilisation.

Capacity – Upon completion of the conversion works and scheduled major maintenance, OMH will have a design annual capacity to of approximately 120k-126k tonnes of FeSi, 333k-400k tonnes of manganese alloys and 21k-24.5k tonnes of silicon metal. The Plant also consists of a sinter plant that has a design capacity to produce 250k tonnes of sinter ore per annum.

Material price trend – 44% Mn ore closed at USD4.17/dmtu CIF China as of Dec-23 vs. USD4.37/dmtu CIF China Sep-23. Meanwhile, FeSi prices decreased from USD1360 to USD1285 per tonne CIF Japan and SiMn price fell from USD945 to USD900 per tonne CIF Japan and these were mainly attributable to reduced global demand and higher production rates from FeSi smelters in China.

Shipping rates – Freight rates have normalised over the past few quarters, but with the recent spike in the Middle East tension, M+ Online reckons that freight prices may remain elevated above the pre-Covid19 pandemic levels.

Valuation & Recommendation

Earnings forecast – No change to M+ Online’s FY23f-25f earnings forecast pending for results announcement this month.

M+ Online maintains BUY with TP at RM1.92. The target price is derived by assigning targeted P/E multiple of 7.0x to mid-FY24f 27.4 sen. The assigned target P/E represents a slight discount to the average of 9.0x of selected mining and smelting companies listed on Bursa Malaysia as well as international scale.

• Risks to M+ Online’s recommendation and target price include weaker-than-expected production and ferroalloy prices. OMH is also exposed to currency risk, whereby a weaker USD against the ringgit would be a drawback and vice versa.

Meanwhile, OM Materials (Sarawak) Sdn Bhd, in collaboration with Sarawak Energy Berhad (SEB), conducted the first Sarawak Corridor of Renewable Energy (Score) Substation Operation workshop.

This two-day workshop, which focused on enhancing the knowledge and skills of participants in high-voltage substation operation and safety procedures, took place from Jan 31 to yesterday at OM Sarawak’s training room.

Led by trainers from SEB, the workshop delved into various aspects of high-voltage substation operation and safety procedures.

Representatives from the State Dispatch Centre (SDC) and other industry players within Samalaju Industrial Park participated alongside OM Sarawak’s personnel, fostering a collaborative learning environment.

OM Materials (Sarawak) Sdn Bhd in a press statement expressed its sincere gratitude to Sarawak Energy Berhad for providing this valuable training opportunity.

“This workshop allowed substation operators within Score to learn from leading industry experts, share best practices and build stronger relationships within the industry, all while enhancing their expertise in critical substation operations.

“The Score Operation Workshop serves as a testament to OM Sarawak’s unwavering commitment to continuous improvement and achieving operational excellence,” it said.

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