Date of Report: October 18, 2024
Broker: Maybank Investment Bank Berhad
Company Overview
Press Metal Aluminium (PMAH MK) is an integrated aluminium producer based in Malaysia with a significant global market reach. The company is known for its production of aluminium products and by-products, heavily reliant on hydropower, providing a lower carbon footprint compared to peers using fossil fuels. The company is committed to achieving carbon neutrality by 2050.
ESG Performance and Sustainability
Press Metal’s Environmental, Social, and Governance (ESG) performance has shown improvement:
- ESG Score: The company received an ESG score of 63 out of 100, an increase from 55 in FY22, indicating above-average performance.
- Greenhouse Gas Emissions: In FY23, the company recorded lower GHG emissions, totaling 11.8 million tCO2e, down from 13.0 million tCO2e in FY22. GHG intensity improved to 3.3 tCO2e per tonne of aluminium production.
- Water Usage and Waste Management: Water withdrawal intensity improved to 2.2 cubic meters per tonne of aluminium, and there was a significant decrease in total waste generation to 170.6 kT in FY23, compared to 181.1 kT in FY22.
- Renewable Energy: The company generated 16.4k GJ of solar energy in FY23, demonstrating its efforts to increase renewable energy usage.
Social and Governance Metrics
- Workforce Diversity: Female representation in management increased to 30.5% in FY23, from 26.7% in FY22, while overall female workforce participation slightly declined to 13.3%.
- Safety: The company reported a decrease in the lost time injury frequency rate (LTIF) to 2.7 per million hours in FY23, down from 3.3 in FY22.
- Governance Structure: Press Metal has a board consisting of 10 members, with 40% being independent non-executive directors and 30% female. The company adheres to various global frameworks, including the TCFD and SASB, and participates in the Aluminium Stewardship Initiative and United Nations Global Compact.
Financial Overview
- Price and Target: The report maintains a BUY rating for Press Metal, with an unchanged target price of MYR 5.70, reflecting a 23% upside from the share price of MYR 4.72 as of the report date.
- Key Financial Metrics (FY22 – FY26E):
- Revenue: FY22 – MYR 15.68 billion, FY23 – MYR 13.80 billion, expected to reach MYR 14.84 billion by FY26.
- Core Net Profit: FY22 – MYR 1.42 billion, FY23 – MYR 1.24 billion, projected to increase to MYR 2.02 billion by FY26.
- Core P/E Ratio: Expected to improve from 31.9x in FY23 to 19.3x in FY26.
- Dividend Yield: Expected to rise from 1.5% in FY23 to 2.1% by FY26.
- Net Gearing: Improved from 53.1% in FY22 to 37.8% in FY23, with further reductions projected.
ESG Targets and Future Outlook
Press Metal has set ambitious ESG goals:
- Carbon Emission Reduction: The company aims to cut Scope 1 and 2 emissions by 15% by 2025 and 30% by 2030, based on a 2020 baseline.
- Water Management: Targeting a reduction in water withdrawal intensity by 10% by 2030.
- Waste Management: Aims to achieve a 95% waste diversion rate by 2026 and zero landfilling by 2030.
- Carbon Neutrality: Committed to reaching carbon neutrality by 2050.
Risk Factors
The report outlines several risks that could impact the company’s performance:
- Commodity Price Volatility: Fluctuations in aluminium, alumina, and carbon anode prices can significantly affect the company’s revenue and cost structure.
- Currency Exchange: Press Metal’s earnings are vulnerable to exchange rate changes, particularly the strength of MYR against USD.
- Operational Expansion: Future expansions in smelting and extrusion plants or upstream acquisitions pose environmental and financial risks.
Analyst Commentary
The report reflects positively on Press Metal’s strategic focus on ESG improvements and operational efficiency. The company’s commitment to sustainability, coupled with its financial strategies, positions it well for long-term growth. However, close attention to commodity prices and currency fluctuations remains crucial.
