---
endpoint: analytics
pattern: Materials
status: done
latency_ms: 223389
conversation_id: aa372fe5-db1d-4b80-ac7d-de66654cc963
citations: 9
created: 2026-05-31 22:23:29Z
---

# What is Press Metal’s core business franchise and the key components of its operating model?

## Press Metal Aluminium Holdings (PMAH MK / 8869 KL) — Core Business Franchise & Operating Model

### 1. Core Business Franchise

Press Metal is **one of the largest primary aluminium smelters in the region**, and its structural edge over global peers is that **its energy comes from hydropower**, which simultaneously (a) gives the company a low and stable energy-cost base and (b) qualifies its output as **"green" aluminium** for ESG-sensitive end-markets [1]. CLSA characterises it as the **only integrated aluminium player in ASEAN**, giving it a "scarcity premium" in the regional listed universe; it is also a high-ESG-score name (Blended ESG Overall 75.0 vs country average 57.0 and GEM sector 62.7) and is **Shariah-compliant** in the Malaysian framework [2].

The company is classified under **Malaysia – Materials** sector coverage [9] and trades under **Reuters: PMET.KL / Bloomberg: PMAH MK**, with shares outstanding of 8,239.6m and a market cap of ~US$9.7bn (May 2025) [3].

Key shareholders: **Alpha Milestone Sdn Bhd (22.3%)** and **Koon Poh Keong (14.5%)** — i.e., founder-family-anchored ownership [3].

---

### 2. Operating Model — The Key Components

The franchise is built on four interlocking pillars: **primary smelting at hydropower-powered Malaysian plants**, **vertical integration upstream into alumina**, **downstream value-added products (VAP)**, and **active LME hedging**.

#### a) Revenue Mix — Four Reporting Segments

Based on the 1Q25 results breakdown, Press Metal's revenue is generated through four segments [7]:

| Segment | 1Q25 Revenue (RMm) | YoY% | Role |
|---|---|---|---|
| **Smelting** (primary aluminium) | 3,223 | +4.5% | Core engine — ~83% of group sales |
| **Extrusion** (downstream products) | 529 | +17.1% | Downstream value-add |
| **Refinery** | 101 | +45.0% | Internal alumina processing |
| **Contracting & Others** | 44 | +315.2% | Ancillary |
| **Total** | **3,897** | **+7.8%** | |

Smelting is the dominant earnings driver; extrusion and refinery sit downstream/adjacent to the core, with the recently restored **P3 smelting plant** (fully operational again as of March 2025) being a key capacity asset [9].

#### b) Smelting Footprint and the Energy Advantage

- Primary smelting capacity is concentrated in **Malaysia (Sarawak)**, powered by hydropower — this is the structural cost-and-ESG moat [1].
- The hydropower sourcing keeps **energy cost per tonne** structurally below coal-powered Chinese peers, while also positioning Press Metal as a **low-carbon ("green") aluminium supplier**, which is increasingly valued in EV, solar, and construction supply chains [1].

#### c) Vertical Integration Upstream — Alumina

Press Metal does not just smelt; it has been **buying its way up the value chain into alumina refining**, the largest single raw-material cost in smelting. Two associate/JV vehicles anchor this:

- **PT Bintan Alumina Indonesia (via 21.75% stake in Nanshan Aluminium, down from 25%)** — alumina refinery capacity guided to expand **from 2m tonnes to 3m tonnes by end-3Q25 and to 4m tonnes by end-3Q26**. Each phase takes 2-3 months to ramp; meaningful contribution from 4Q25 onward [3].
- **PT Kalimantan Alumina Nusantara (PT KAN) — Press Metal owns 80%** — Phase 1 of 1m tonnes targeted for commissioning in **2027**. Per CLSA sensitivity, Phase 1 could contribute up to **RM1.5bn in sales and RM300m in profit** to Press Metal from 2H27/2028 onwards [5].

Strategic implication: combined with Nanshan, PT KAN Phase 1 could lift Press Metal's **alumina self-sufficiency from ~35% today to close to ~90%**, ensuring raw-material stability and superior unit-cost competitiveness vs. peers [5].

This alumina build-out is now the **largest single driver of margin expansion** in the forward model — share of profit from associates is forecast to rise from **RM559m in FY24 (32% of net profit) to RM601m in FY26 and RM745m in FY27 (31% of net profit)**, even as alumina spot prices soften [3].

#### d) Downstream — Value-Added Products (VAP) Strategy

Press Metal is actively shifting product mix away from pure commodity ingot toward **higher-margin Value-Added Products (VAP)** — extrusion billets, alloys, and specialty forms:

- **VAP was 46% of sales volume in 1Q25**
- Target: **50% in 2025**, scaling to **70% by 2027** [6]

This shift compresses cyclicality and improves realised price per tonne above LME spot.

#### e) Hedging Program (LME)

Management actively hedges a portion of forward primary aluminium production at fixed LME prices to lock in smelting margin and dampen volatility [5]:

| Year | Hedge Ratio | Average Hedge Price |
|---|---|---|
| 2025 | 60% (already locked) | ~US$2,600/mt |
| 2026 | 40% | ~US$2,700/mt |
| 2027 | 35% | US$2,700+/mt |

The blended realised price (hedge + spot) drives smelting revenue; in CLSA's revised model the realised base price runs ~US$2,574/mt in FY25, US$2,609 in FY26 and US$2,651 in FY27.

#### f) Tax Structure

Effective tax rate runs in the **10–15% band**, reflecting Sarawak smelter tax incentives netted against the new global minimum-tax provision. 1Q25 ETR was 13% [6].

---

### 3. Earnings Power and Margin Trajectory

The model is one of **steady revenue with widening net margins** as the upstream alumina pieces ramp and VAP mix lifts:

| Year | Revenue (RMm) | Net Profit (RMm) | Net Margin |
|---|---|---|---|
| FY2023 | 13,803 | 1,214 | 9% |
| FY2024 | 14,910 | 1,761 | 12% |
| FY2025CL | 16,150 | 2,083 | 13% |
| FY2026CL | 16,318 | 2,249 | 14% |
| FY2027CL | 16,520 | 2,404 | 15% |

ROE is sustained in the **~20–23% range** over the forecast horizon, while net debt/equity falls from 26.3% (FY24) toward **net cash by FY27** — i.e., the operating model produces enough FCF to fund the alumina capacity build while de-gearing [3]. The 1Q25 dividend was 2.0 sen with a 36% payout ratio [7].

---

### 4. Key Risks to the Operating Model

CLSA flags four operating-model risks worth keeping in view [4]:

1. **Faster-than-expected China capacity recovery** — would soften Aly prices.
2. **Regulatory risk in Sarawak** — an **imminent aluminium tax pending finalisation by the Sarawak state government** could compress smelting margins or claw back energy-cost advantage.
3. **Inability to sustain low energy-source costs** (categorised as low probability but high impact — this is the core moat).
4. **Commodity-price volatility** from Russia-Ukraine and other geopolitical tensions affecting both LME aluminium and raw materials (alumina, carbon anode).

---

### Summary — One-Line Read

Press Metal is **ASEAN's only integrated primary aluminium platform**: a Malaysian hydropower-powered smelter [1] that is **(i) vertically integrating upstream into alumina** via PT Bintan/Nanshan and PT KAN to take self-sufficiency from ~35% to ~90% [5], **(ii) tilting downstream mix to ~70% Value-Added Products by 2027** [6], **(iii) systematically hedging 35–60% of LME exposure** [5], and **(iv) using its "green aluminium" and Shariah-compliant status to capture a scarcity-premium valuation** [2] — with the principal regulatory risk being a potential Sarawak state aluminium tax [4].

---

**Sources**

[1] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — Investment thesis (607960312LinqAlpha.PDF)
[2] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — Valuation details / scarcity premium (607960312LinqAlpha.PDF)
[3] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — PT Bintan alumina expansion, shareholders, financials (607960312LinqAlpha.PDF)
[4] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — Investment risks (Sarawak tax) (607960312LinqAlpha.PDF)
[5] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — Hedging guidance, PT KAN Phase 1 (607960312LinqAlpha.PDF)
[6] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — VAP mix, effective tax rate (607960312LinqAlpha.PDF)
[7] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — 1Q25 segment revenue breakdown (607960312LinqAlpha.PDF)
[8] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — Doubling alumina production headline (607960312LinqAlpha.PDF)
[9] Press Metal — O-PF (Moving ahead on expansion) — CLSA, 22 May 2025 — 1Q25 results paragraph / P3 restored (607960312LinqAlpha.PDF)

## Citations

- [1] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [2] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [3] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [4] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [5] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [6] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [7] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [8] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>
- [9] **607960312LinqAlpha.PDF** · clsa — <s3://ext-linq-rms-clsa/2025/05/607960312LinqAlpha.PDF>

