PMetal: Earnings boosted by insurance claim received

Results Update

For QE31/3/2016, PMetal's net profit increased by 144% q-o-q or 119% y-o-y to RM95 million while revenue was mixed; down 7% q-o-q or 22% y-o-y to RM1.29 billion. Its PBT increased q-o-q mainly due to the RM50  million  insurance claim recognized. The insurance claim received is the 2nd interim payment. The first interim payment was RM20 million was booked in the account in QE30/9/2015.


Table 1: PMetal's last 8 quarterly results


Chart 1: PMetal's 34 quarterly results

Aluminium Outlook

Aluminium is in a long-term gradual uptrend that stretches back to early 1994. The support of this uptrend line is at USD1400 per ton. In the recent decline, it tested that uptrend line and rebounded.


Chart 2: Aluminium's monthly chart from 1989 to May 2016 (Source: Infomine.com) 
 
The current rebound may bring aluminium prices to test its intermediate downtrend line at USD1800 per ton. Currently it is trading around USD1600 per ton.



Chart 2: Aluminium's weekly chart from 2011 to May 2016 (Source: Infomine.com)

Valuation

PMetal (closed at RM2.94 yesterday) is now trading at a PER of 20 times (based on last 4 quarters' EPS of 14.45 sen). Its DY stood at 2.6%. At these PER & DY, PMetal is deemed fairly valued.

Technical Outlook

PMetal is now testing the downtrend line, RR at RM3.00. It has been doing so for the past 3 weeks. A convincing breakout above the RM3.00 mark would send the share price to test its horizontal line at RM3.50 or even its September 2014 high of RM3.70. The thinning volume & the tepid momentum (see ADX & ADXR) mean that an upside breakout may not happen in the near term.


Chart 3: PMetal's weekly chart as at May 4, 2016_9.45am (Source: ShareInvestor.com)


Chart 3: PMetal's monthly chart as at May 3, 2016 (Source: ShareInvestor.com)

Conclusion

Despite the improved financial performance (brought on by insurance claim received), it is not easy to make a case to buy or to hold onto PMetal shares. Its valuation is no longer attractive and its technical outlook is neutral unless an upside breakout takes place. With that, I think it is advisable to take some profit on this stock.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Pmetal.