PMetal: Earnings Stayed Strong

Results Update

For QE30/6/2017, PMetal's net profit increased by 1% q-o-q or 3% y-o-y to RM150 million while revenue rose 3% q-o-q or 31% y-o-y to RM2.079 billion.  Higher profit was mainly due to the strengthening of metal price during the current year quarter under review and continuous improvement in reducing the production costs


Table: PMetal's last 8 quarterly results


Graph: PMetal's 39 quarterly results

Aluminium Outlook

Contrary to my earlier post on aluminium outlook, prices shot up in the past 2 weeks from USD1985 a tonne to USD2100 a tonne today. Its immediate resistance is at the horizontal lines at USD2100 and USD2200.


Chart 1: Aluminium's monthly chart from 2009 to Aug 2017 (Source: Investing.com)

Prospect

PMetal is fairly confident that its financial performance this year will be satisfactory. This is based on the following:

Aluminium price continues to increase as more and more production cuts are being announced in China according to the government supply reform policy. As a result, the China smelting production is expected to slow down and the world’s supply and demand will tilt towards a deficit situation which will support long term aluminium price performance.
 Our smelting operations will continue to run at full capacity for the remaining of the year with demand continues to be well supported. We will remain focused on expanding our value-added products and improving the overall operation efficiency.

Valuation

PMetal (closed at RM3.34 at end of morning session today) is now trading at a PER of 21 times (based on last 4 quarters' EPS of 16.25 sen). Based on this PER, PMetal is deemed fairly valued.

Technical Outlook

PMetal broke above its recent high of RM3.00. This leads to the continuation of its prior uptrend.


Chart 2: PMetal's weekly chart as at Aug 16, 2017 (Source: ShareInvestor.com)

PMetal was rising in a long-term upward channel up until January this year. At the start of the year, PMetal broke above the upper line at RM1.70 and shot up.


Chart 3: PMetal's monthly chart as at Aug 17, 2017 (Source: ShareInvestor.com)

Conclusion

Based on strong financial performance, fair 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.