KUALA LUMPUR: The earnings of Malaysia Smelting Corporation Bhd (MSC) are expected to be stronger on a quarterly basis in the second quarter of financial year 2024 (2QFY24), though its smelting business remains impacted, said Affin Hwang Investment Bank (Affin Hwang).
The research firm previewed the tin smelting and mining company's earnings ahead of its 2QFY24 results, which are estimated to be stronger in the RM20 million to RM25 million range on the back of higher tin prices, which have jumped 25 per cent.
"The improvement will likely come only from its mining operations, as we think MSC is still unable to fully leverage on the strong tin prices given the ongoing impact of its tolling operations amidst the export constraints by Myanmar and Indonesia," it said in a research note today.
However, Affin Hwang maintained its'sell' call with an unchanged target price of RM2.30 as the firm believed the current share price more than reflected the tin price rally, which is expected to continue easing ahead, despite the high tin price environment.
The firm added that MSC has been unable to capture the high tin prices due to its impacted tolling business.
"FY24 earnings are expected to only grow a modest 2.0 per cent year on year (yoy) as MSC's smelting operations remain impacted by export constraints of major tin-producing countries," it said.
Whilst the firm's 2024-2025 average selling price (ASP) estimates may imply some year-over-year growth, it expected volatility in its share price, which is a near-term weakness.
"Looking beyond that, our FY25 earnings imply a 14 per cent yoy growth despite lower tin prices as the smelting business is expected to normalise, coupled with cost savings brought about by its new plant in Pulau Indah.
"Our sensitivity analysis reveals that changes of US$3,000 to ASP would impact our 2025 earnings forecasts by 8.4 per cent, while every 0.10 appreciation/depreciation in US dollar against the ringgit impacts earnings by about 1.6 per cent, and vice versa," it added.
As of 10:17am, MSC's shares fell 0.8 per cent or 2 sen, to RM2.56, valuing the company at RM1.08 billion.