PMetal: Earnings Boosted by Increased Capacity

Results Update

For QE30/6/2016, PMetal's net profit increased by 54% q-o-q or 491% y-o-y to RM146 million while revenue rose 23% q-o-q or 67% y-o-y to RM1.585 billion. Revenue rose q-o-q due to progressive commissioning of the new second phase facility which achieved full capacity in June 2016. PBT increased q-o-q in line with higher revenue and despite lower insurance claim of RM45 million as compared to RM50 million recognized in QE31/3/2016.


Table 1: PMetal's last 8 quarterly results


Chart 1: PMetal's 35 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 USD1450 per ton. In the recent decline, it tested that uptrend line and rebounded. However aluminium, upside is capped by an intermediate downtrend line, RR at USD1700.


Chart 2: Aluminium's monthly chart from 1989 to Aug 2016 (Source: Infomine.com) 
 
Valuation

PMetal (closed at RM4.30 yesterday) is now trading at a PER of 18 times (based on last 4 quarters' EPS of 23.78 sen). Going forward, PMetal's EPS would be higher due to increased capacity. To arrive at forward EPS, I annualized the EPS for QE30/6/2016 (excluding the insurance claim). The annualized EPS would be about 31 sen and forward PER would be 14 times. Based on earnings growth of 30% for the past 4 quarters, PMetal's PEG ratio is less than 0.5 times; making it an attractive stock. In addition, it pays a decent dividend, with a yield of 2.1%.

Technical Outlook

PMetal broke above the downtrend line, AB at RM3.00 in April. It is rising in an intermediate uptrend line, SS with support at RM3.90-4.00.


Chart 3: PMetal's weekly chart as at Aug 16, 2016 (Source: ShareInvestor.com)

PMetal is rising in a long-term upward channel, with the upper line at RM5.00. This may serve as a resistance for the current upleg of the stock.


Chart 4: PMetal's monthly chart as at Aug 16, 2016 (Source: ShareInvestor.com)

Conclusion

Based on strong financial performance, attractive valuation and bullish technical outlook, PMetal is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.