---
endpoint: analytics
pattern: Materials
status: done
latency_ms: 194052
conversation_id: eeef8afd-f82b-433d-a852-f4dd098d62fe
citations: 0
created: 2026-05-31 20:08:32Z
---

# What’s the bull case bear case for Press Metal?

# Press Metal Aluminium (PMAH MK, 8869): Bull vs Bear Case

**Source coverage**: Internal CLSA research (3 dedicated Press Metal notes plus sector read-throughs, covering Oct 2024 → May 2025). External public-data search (Manticore) did not return Press Metal earnings transcripts or filings directly, so the synthesis below draws from CLSA internal coverage — currently the freshest and most detailed view in the firm's archive. **CLSA's latest call (22 May 2025): Outperform, TP RM7.30** (raised from RM6.30), based on 26× FY26CL P/E — the company's 5-year mean [1].

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## Snapshot: What is Press Metal?

The only integrated aluminium smelter in ASEAN, operating P1, P2, P3 smelter lines in Sarawak (Malaysia) powered by long-term hydropower contracts. Holds 21.75%–25% (stepped down from 25%) of Indonesia's PT Bintan / Nanshan Aluminium alumina refinery — its associate that has become the engine of margin expansion [2]. Valuation premium is supported by three structural attributes: (i) ASEAN scarcity, (ii) high ESG score (hydropower-fed), and (iii) Shariah-compliant status, opening it to GCC and Malaysian Islamic capital pools [3].

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## Bull Case

### 1. Structural aluminium supply tightness — China's 45m mt cap is binding
Chinese capacity is now running at ~43.5m mt against a hard 45m mt annual ceiling, leaving very little supply elasticity. Demand is being pulled by EV, solar, and infrastructure — more than offsetting weak Chinese property demand. CLSA flags this as an upside risk to LME prices and a direct positive for PMAH earnings [4].

### 2. China's removal of the 13% aluminium export tax rebate (Dec 2024)
This policy change is structurally bullish for ex-China producers. CLSA estimates a potential 5m mt shortfall in international markets outside China, lifting both LME and regional premiums (MJP, EU). PMAH is one of the most direct beneficiaries given Sarawak smelters supply Asia/Japan markets [5].

### 3. Alumina refinery doubling at PT Bintan — the multi-year margin lever
Associate alumina capacity is scaling **2m → 3m tonnes by end-3Q25, then to 4m tonnes by end-3Q26**. Management already expects full ramp 2–3 months post-commissioning, with meaningful contribution starting 4Q25 [2]. The associate already contributes a rising share of group profit: FY24 RM559m (32% of NP), forecast RM601m (27%) in FY26 and RM745m (31%) in FY27 [7]. The integration also gives PMAH a partial **natural hedge** against alumina cost spikes — when alumina input cost rises, the associate's refining margin expands and offsets the smelting hit [11].

### 4. Easing alumina prices + still-firm LME = expanding smelting margins
Alumina FOB prices peaked near US$780/mt in Aug-Oct 2024 but have crashed back to ~US$310–350/mt by Feb–Apr 2025 [13]. Combined with LME aluminium prices well-supported around US$2.5–2.6k/mt on China's supply cap [2], CLSA models **net profit margin lifting from 11.8% (FY24) → 12.9% / 13.8% / 14.6%** (FY25/26/27CL) and **EBITDA margin from 17.7% → 19.4%** [9].

### 5. Operating execution — P3 fully restored, earnings momentum intact
P3 smelter operations were fully restored in March 2025. 1Q25 net profit RM462m (+13% YoY) was in line at 23% of full-year estimates, with associate profit +95% YoY at RM170m [10]. Earlier, 9M24 earnings of RM1.3bn (+47% YoY) ran ahead of consensus at 79% [6].

### 6. Valuation premium is defensible
CLSA's 26× FY26 P/E multiple sits at the 5-year mean. Justified by: (i) ASEAN scarcity (no peer), (ii) one of the highest ESG scores in CLSA's coverage given hydropower-based smelting, (iii) Shariah-compliant access, and (iv) structurally elevated long-term ASP driven by new-economy aluminium demand (EV/solar/grid) [3].

### 7. Hedge book provides earnings visibility
Hedge coverage was lifted to 50% at US$2,600/mt for FY25 and 40% at US$2,650/mt for FY26 (from prior 30%/25%) — locking in roughly half of FY25 revenue at attractive prices and softening downside if LME corrects [13].

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## Bear Case

### 1. Aluminium price downside from US tariffs / weaker global demand
LME prices "softened amid increased inventories and uncertain macroeconomic backdrop due to US tariffs" — CLSA acknowledges the demand-side risk even as China supply discipline offsets it [7]. A sustained China property/manufacturing slowdown or escalating trade war could outweigh the supply tightness narrative.

### 2. Chinese capacity recovery risk
The #1 listed investment risk: a **quicker-than-expected recovery in China's idled capacity** could break the supply-cap narrative and dump LME prices [8]. Beijing's 45m mt cap is policy-driven, not physical — it could be loosened if domestic priorities shift.

### 3. Sarawak aluminium tax — a binary regulatory overhang
Sarawak state has signaled an **imminent aluminium tax**, still pending finalisation. This is a direct cost imposition on PMAH's Sarawak smelting hub and is explicitly listed as a key risk in every CLSA Press Metal note [8]. The exact rate/structure is unknown — a tail risk that could compress per-tonne margins.

### 4. Energy cost / hydropower contract risk
CLSA flags as "low risk" but real: PMAH's competitive cost position depends on continued access to **low-cost Sarawak hydropower**. Any renegotiation of power purchase agreements, tariff hikes, or hydrology disruptions (drought) would directly hit unit economics [8].

### 5. Alumina cost volatility and raw-material tightness
The Australian alumina FOB curve went from ~US$350/mt (late 2023) → US$780/mt (Oct 2024) → ~US$310/mt (Feb 2025) — a 130% spike then a 60% collapse inside 12 months [13]. In 3Q24, the alumina spike pushed input costs +16% QoQ; only the associate contribution rescued the margin [11]. Ukraine-Russia tensions and supply concentration in a handful of regions keep raw-material volatility elevated [8].

### 6. Carbon anode pricing remains volatile
Carbon anode prices climbed from US$510–530/mt (2024) to ~US$700/mt by Apr 2025 [13], a 30%+ swing that pressures smelting cost just as alumina relief was starting to flow through.

### 7. FX exposure — MYR strength can erode reported earnings
3Q24 saw RM95m net FX losses despite an otherwise strong operational quarter [6]. CLSA models MYR/USD strengthening from 4.60 (FY24) to 4.40 (FY25–26) [13] — translation drag on USD-denominated LME revenue.

### 8. Capacity ramp execution
P3 plant only restored full operations in March 2025 — i.e. the smelter side had an operational hiccup that compressed 1Q25 volumes [10]. The 4m-tonne Nanshan/PT Bintan refinery ramp by 3Q26 is a multi-step capex execution that is now baked into CLSA's bull forecasts — any slippage is a direct EPS downgrade catalyst [13].

### 9. Valuation already prices in the structural story
At 26× FY26 P/E for the 5-year mean multiple, with FY26/27 EPS growth slowing to +8% / +7% (vs. +18% in FY25) and **ROE declining 22.6% → 21.1% → 19.7%** as the asset base grows [9], the rerating optionality is limited. The stock needs alumina expansion to land on time *and* LME prices to hold above ~US$2.5k for the multiple to expand.

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## Earnings & Margin Walk (CLSA model, May 2025)

| RM'm | 2023A | 2024A | 2025CL | 2026CL | 2027CL |
|---|---|---|---|---|---|
| Revenue growth (YoY) | -12.0% | +8.0% | +8.3% | +1.0% | +1.2% |
| Net profit growth | -13.7% | +45.0% | +18.2% | +8.0% | +6.9% |
| Net profit margin | 8.8% | 11.8% | 12.9% | 13.8% | 14.6% |
| EBITDA margin | 15.7% | 17.7% | 19.0% | 19.2% | 19.4% |
| ROE | 17.9% | 22.8% | 22.6% | 21.1% | 19.7% |
| Dividend payout | 46.6% | 32.1% | 32.3% | 32.3% | 32.4% |

Source: CLSA, May 2025 [9].

## Key Assumption Sensitivities (FY26)

| Lever | CLSA assumption | Direction of risk |
|---|---|---|
| LME spot | US$2,550/mt | Down if China loosens cap / US recession |
| Realised price | US$2,609/mt (40% hedged @ US$2,650) | Hedge insulates ~40% |
| Alumina cost | RM3,673m (lower assumption) | Up-risk if China alumina lags |
| PT Bintan capacity | 4m tonnes by 3Q26 | Execution-dependent |
| MYR/USD | 4.40 | MYR strength = translation drag |
| Net profit (revised) | RM2,249m (+7.3% vs prior) | -- |

Source: CLSA model [13].

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## Synthesis — What Tips the Balance

**The setup is asymmetric in the bull's favor near-term but compresses over time.** The CLSA thesis depends on three pillars holding together: (a) China's 45m mt cap stays binding, (b) the PT Bintan alumina ramp lands on schedule, and (c) Sarawak doesn't impose a punitive aluminium tax. If all three hold, PMAH is a structurally re-rated industrial — integrated, ESG-clean, ASEAN-scarce.

**The bear surfaces if any single pillar breaks**: a Sarawak tax shock is the most idiosyncratic and least diversifiable risk; a China capacity policy reversal is the largest systemic risk; and an alumina ramp slip is the most execution-sensitive. Each of these is binary in impact, which is why CLSA prices the stock at sector-mean (26× P/E) rather than at a premium multiple despite the structural story.

The recent **TP increase from RM6.30 to RM7.30** (+16%) primarily reflects (i) the alumina capacity uplift baked into FY26-27 numbers and (ii) rolling the valuation base year to FY26 — not a multiple expansion [1]. That tells you CLSA's view is "earnings will grow into the price," not "the market will re-rate."

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**Sources**
[1] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — TP raised RM6.30→RM7.30
[2] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — PT Bintan alumina ramp 2m→4m tonnes
[3] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — Valuation rationale
[4] Press Metal — O-PF (Tailwinds are blowing), CLSA, 7 Oct 2024 — Chalco read-through, China 43.5/45m mt cap
[5] Press Metal — O-PF (Outlook remains bright), CLSA, 1 Dec 2024 — China 13% export tax rebate removal
[6] Press Metal — O-PF (Outlook remains bright), CLSA, 1 Dec 2024 — 9M24 +47% YoY results
[7] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — Associate profit table; US tariff softness
[8] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — Investment risks (China capacity, Sarawak tax, energy)
[9] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — Financial summary table FY21–27CL
[10] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — 1Q25 results; P3 restored Mar 2025
[11] Press Metal — O-PF (Outlook remains bright), CLSA, 1 Dec 2024 — Alumina cost easing; associate offset
[12] Press Metal — O-PF (Tailwinds are blowing), CLSA, 7 Oct 2024 — China stimulus, Fed cut cycle, +7% LME rally
[13] Press Metal — O-PF (Moving ahead on expansion), CLSA, 22 May 2025 — Key assumption changes (hedge, alumina, capex)

*Note: External public-data search (earnings transcripts, filings, news in Manticore) did not return direct PMAH chunks for this query — coverage is asymmetric toward internal CLSA research. If you need verification against the company's own IR materials or peer reads (Rusal, Chalco, Norsk Hydro, Alcoa), I can run a separate targeted query.*

