PETALING JAYA: Press Metal Aluminium Holdings Bhd has bagged a business deal worth RM780 million with Hong Kong’s Daching Enterprises Ltd, adding to already positive sentiments for the company which has been given a boost by rising aluminium prices.
The deal will see immediate export sale of aluminium ingots worth RM110 million to Daching, and five-year export deal of the same product for RM670 million.
In a statement today, the Malaysia External Trade Development Corporation (Matrade) said the deal was inked during a meeting on April 4, in conjunction with the trade and investment mission to China led by international trade and industry minister Zafrul Abdul Aziz.
Simon Chan, director of Daching and chairman of Xiamen Xiashun Aluminium Foil Co Ltd, expressed the group’s interest to continue sourcing products from Malaysia due to their quality, service delivery, sustainability and professionalism.
Press Metal co-founder and group CEO Koon Poh Keong said the company was pleased with the assistance provided by Matrade in introducing reputable clients like Daching.
“We hope that there will be more business-matching sessions, especially since China’s international borders have fully reopened,” he said.
Even before it was announced, Press Metal was expected to post solid earnings in 2023.
In a research note, Maybank Investment Bank said strong aluminium prices and growing sales of its value-added products augurs well for Press Metal.
Initiating coverage of Press Metal, Maybank has set a “buy” call on the group with a target price of RM5.65.
According to the research house, the group would likely post three-year earnings compounded annual growth rate (CAGR) of 12.9% from the financial year ended Dec 31, 2022 (FY22) to FY25.
“It’s entrenched position as the largest aluminium smelter in Southeast Asia, strategically located within close proximity to raw materials and having significant energy cost advantage via its hydro-powered facility in Sarawak are its strong attributes,” Maybank IB Research said.
Earnings boost from rising aluminium prices
Maybank IB Research also noted the sustained spot aluminium price of US$2,500 (RM11,000) per tonne on the back of prolonged tight supply; growing sales from its value-added products; improved cost structure from higher alumina in-house supply; and strong free cash flow to drive down gearing levels to 4% by FY25 should anchor its 12.9% FY22-FY25 three-year earnings CAGR projection.
It said Press Metal was trading at a relatively palatable 26 times the estimated price-earnings ratio for FY23, which was one standard deviation below its five-year average of 33 times.
Maybank IB Research said Press Metal had a total extrusion and smelting capacity of 1.29 million tonnes per annum, with 100% of its smelting operations being hydro-powered, while its strategic holdings in Japan Alumina Associates and PT Bintan could provide more stable and cheaper alumina supply.
The group is one of the world’s largest manufacturers of premium thin gauge aluminium foil, with an annual production capacity of 120,000 tonnes of aluminium foil and 220,000 tonnes of aluminium sheet products.
Its products are sold to customers worldwide, and are widely used in the packaging of food and beverages as well as pharmaceutical products, and as cathode foil in batteries for electric vehicles.
History of Malaysia’s aluminium king
Interestingly, if you had bought RM10,000 of Press Metal shares in 2006, you would be a millionaire today, as your initial investment would be worth RM1.23 million. Since listing at 4 sen some 17 years ago, the share is up 12,325%, to RM4.97 at the time of writing.
In fact, the man behind the company, Koon Poh Keong is now a billionaire, recently appearing as the 4th richest person in Malaysia on the Forbes 2023 billionaire list, with a net worth of US$4 billion (RM17.6 billion).
This is a far cry from 1986, when in the midst of a recession, Poh Keong and his four brothers pooled around RM200,000 to start Press Metal, renting a small factory in Puchong, Selangor. The rest, as they, is history.
Some 37 years later, Press Metal has grown into Southeast Asia’s largest integrated aluminium producer and competes with the likes of Rio Tinto, Russia’s Rusal and the Aluminum Corp of China.
Poh Keong is group chief executive while Poh Ming is executive vice chairman and Poh Weng is executive director while two of the brothers have passed away.
In a previous interview, Poh Keong said the siblings admired how the Taiwanese industrialists made so much money in manufacturing and it was their dream to emulate their success. Within a few years, the brothers saved enough money to buy up a competitor’s production equipment for their own factory.
In 1999, Press Metal began to export aluminium extrusion materials to the UK. In 2005 the Koon brothers expanded to Guangzhou, China with the establishment of an aluminium extrusions factory called Press Metal International Ltd. It has a production capacity of 160,000 tonnes.
Today with three smelters in Sarawak, Press Metal’s total smelting capacity stands at over a million tonnes, reinforcing its position as the largest Southeast Asia aluminium producer and a key global player in the aluminium industry.
For the financial year ended Dec 31, 2022 the company posted RM1.42 billion in net profits, up 42% year-on-year (y-o-y) from the RM1 billion in 2021.
At close today, the counter was unchanged, at RM4.95, giving the company a market capitalisation of RM40.79 billion. - FMT
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