RHB Research has maintained its OVERWEIGHT call on the basic materials sector, with Press Metal Aluminium Holdings (PMAH) remaining its top pick as a structural aluminium supply deficit is expected to keep prices elevated.
Both Press Metal and Malayan Cement (LMC), the two stocks under RHB’s coverage, delivered results within expectations.
RHB remains upbeat on aluminium, supported by persistent supply constraints, while maintaining a positive longer-term view on Malayan Cement due to improving operational efficiency. However, higher coal costs are expected to weigh on the cement producer’s earnings from FY27.
Valuations also remain attractive, with both stocks trading below their respective historical averages.
Press Metal’s management expects disrupted production in the Middle East to take between six and 12 months to restart.
However, RHB cautioned that renewed regional conflict and persistent shipping disruptions through the Strait of Hormuz could push the recovery timeline further.
Against this backdrop, the aluminium market is expected to remain in a deficit of around 900,000 to one million tonnes in 2026, while demand registered a marginal year-on-year improvement during 1H26.
Cost pressures nevertheless increased during the latest quarter. Press Metal’s alumina costs rose by US$20 to US$30 per tonne quarter-on-quarter, while logistics costs climbed 15% to 20% and carbon anode costs increased 7% to 8%.
Despite this, RHB expects Press Metal to deliver a stronger set of results in 2H26.
The improvement should be supported by the roughly one to 1.5-month lag in aluminium pricing, lower alumina and logistics costs and a higher Main Japanese Ports premium contracted at US$395 per tonne. Logistics account for less than 10% of the group’s overall costs.
RHB maintained its London Metal Exchange aluminium price assumptions of US$3,250 per tonne for 2026 and US$3,050 for 2027. The year-to-date average aluminium price stood at US$3,329 per tonne, about 2% above its 2026 assumption.
A significant longer-term catalyst for Press Metal is its 80%-owned Kalimantan Alumina Nusantara project, which is scheduled to begin commissioning in 2Q27.
Phase 2 is expected to get underway towards the end of FY27.
Once expanded, the project could lift Press Metal’s alumina self-sufficiency to almost 100%, which RHB believes would materially expand the group’s smelting margins.
The research house sees the development as a major catalyst for Press Metal and believes the combination of elevated aluminium prices and structural supply tightness could justify a re-rating of the stock to valuations above its historical mean.
Press Metal therefore remains RHB’s top sector pick.
For Malayan Cement, the outlook is more mixed despite improvements in operating efficiency.
RHB expects the company to record a 9% year-on-year decline in PATAMI in FY27, mainly because of higher coal costs.
Malayan Cement has secured coal supplies until October or November 2026 at US$80 to US$90 per tonne, which is between 15% and 38% higher than FY26 levels.
RHB estimates that every US$10 per tonne increase in coal prices could reduce annual earnings by 5% to 6% and lower EBIT margins by about 130 basis points, assuming minimal ability to pass higher costs on to customers.
Nevertheless, cement prices and rebates have remained intact, indicating that industry average selling prices could remain stable in the near term.
Malayan Cement is also optimistic that sales volumes will improve quarter-on-quarter in 1QFY27.
RHB expects demand to gradually strengthen as major infrastructure projects move forward, including Segment 2 of the Penang Light Rail Transit project and the East Coast Rail Link’s Port Klang extension.
Despite near-term pressure from coal prices, RHB believes Malayan Cement’s valuation may be bottoming out, with the stock trading at its lowest valuation in three years and around 1.25 standard deviations below its historical mean.
The research house views this as an attractive re-entry level, particularly as underlying profitability remains healthy.
Malayan Cement’s EBITDA margin improved to 32.9% in FY26 from 30.2% in FY25, reflecting greater operating efficiency.
RHB consequently remains positive on the stock despite expecting higher fuel costs to temporarily weigh on earnings.
Overall, RHB believes the basic materials sector continues to offer attractive opportunities, particularly through Press Metal’s exposure to the structural aluminium deficit and longer-term margin expansion from greater alumina self-sufficiency.
Key downside risks to its sector view include a sharp decline in aluminium prices, persistently elevated raw material costs and a broader economic slowdown.
