Tuesday, July 9, 2013

Press Metal - Update on the Mukah plant shutdown

Press Metal -
Price Target:3.60
Last Price:2.25
Update on the Mukah plant shutdown

- Our checks with management indicate that Press Metal Bhd’s Mukah plant could be shut down for 3-6 months depending on the severity of the damage caused by the power outage last week (June 27).

- We were told that preliminary investigations have already been initiated but it would take some time before the insurers could ascertain the full impact and consequence of the damage.

- Nevertheless, management said it had adequate insurance coverage and could utilise the extra capacity at its Samalaju plant to ensure delivery to its affected customers. The Samalaju plant is currently being ramped up to its full capacity (320,000 tonnes p.a. vs. Mukah’s 120,000 tonnes p.a.).

- To recap, Press Metal had to shut down its Mukah plant following a major power outage last week. The blackout resulted in solidification in the pots and the plant had to be shut down for reconstruction works. According to reports, the power failure was caused by a sudden drop of 456kV of power supply in the Bakun hydro plant.

- As Press Metal is seeking claims from its insurers, we deem it unlikely that management would also seek damages from Sarawak Energy Bhd for the incident. Management said the closure is unlikely to have a significant impact on its earnings.

- Pending further details, we maintain our forecasts and valuation for Press Metal. Nevertheless, we have computed the impact of the closure of the Mukah plant for six months, which would reduce its FY13F net profit to RM36.8mil from RM138.4mil previously. But the shortfall could be less as our rough estimates still assume status quo for electricity cost during the period.

- Meanwhile, Malaysian Rating Corp yesterday downgraded Press Metal’s outstanding RM317.5mil Redeemable Secured Loan Stocks (RCSLS) with detachable warrants from A- to BBB following the unexpected shutdown of the Mukah plant. However, our computations show that Press Metal would still have sufficient operating cash flow (RM301mil vs. RM330mil previously) should the Samalaju plant be closed for six months.

- We maintain our fair value of RM3.60/share for now as we have not changed our FY14F forecasts (12x PE) pending further details.

Source: AmeSecurities

Source/Extract/Excerpts/来源/转贴/摘录: http://klse.i3investor.com/
Publish date: 05/07/13

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