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For Accredited Investors (AI) and/or Professional Investors (PI) ONLY. Friday, 27 October 2017
Press Metal Aluminium Holdings Berhad (Press Metal) is a Malaysia-based aluminium company with a smelting capacity of 760,000 tonnes per annum
(tpa) and an extrusion capacity of 160,000 tpa. The company was incorporated in 1986 and was listed on the Kuala Lumpur Stock Exchange in 1993.
The company attained meaningful size of operations only in the last three to four years, after it expanded its capacity from 120,000 tpa to 760,000 tpa.
As of 26 October 2017, it had a market capitalisation of around MYR15b (~USD3.5b). In 2010, Sumitomo Corporation acquired a 20% stake in the
companys smelter operations and today has a strategic partnership with the company. Press Metal is owned and run by the founding Koon family,
which holds a 48% stake in the company. Tan Sri Koon Poh Keong is the Chief Executive Officer of the company. Senior management of the company
owns a 12% stake while 40% is held by public shareholders.
Bond details
Bond ISIN Rating Amount Outstanding Recommendation Risk Rating*
(Moodys/S&P/Fitch)
PMALMK 4.8% 10/2022 XS1704655635 Ba3/BB-/NR USD400m BUY P4
* as of 27 October 2017
Summary and recommendation
At its current indicative offer yield (of around 4.4% at the time of writing), the Press Metal bond trades in line with comparable BB category bonds in
Asia. While absolute yield is relatively low for a low BB-rated credit, investors could look at the bond for coupon clipping, especially given its expected
stable fundamentals. Moreover, the bond offers some rarity value (as sub-investment grade issuances from Malaysia are infrequent). Hence, the bond
should be technically well-supported in the secondary market.
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and should not be disseminated or distributed to third parties without our prior written consent. Please refer to the relevant
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herein. DBS accepts no liability whatsoever with respect to the use of this document or its contents.
For Accredited Investors (AI) and/or Professional Investors (PI) ONLY. Credit Flash 27 October 2017
Strategic relationship with Sumitomo helps distribution
Sumitomo Corporation (Baa1/A-) has a 20% stake in Press Metals smelter operations (that is, in the companies operating the smelters, and not at
the listed company level see corporate structure at end of report). Sumitomo is also a key customer for Press Metal, accounting for 28% of total
sales and 39% of aluminium sales in 2016. While optically this results in customer concentration, we view this as a beneficial relationship as
Sumitomo, as a trader, only provides access to its network of customers and the end-user profile is more diversified.
In addition, Gerald Metal, an alumina supplier to Press Metal, is also a customer and accounted for around 15% of its sales in 2016.
The company believes these relationships (of over 14 years with Sumitomo and seven years with Gerald Metal) provide demand stability. As aluminium
is a globally-traded commodity, we believe offtake risk is not significant even if there were to be any change in the event existing arrangements with
Sumitomo and Gerald Metal change.
Geographically, the companys key markets are around Southeast Asia, which accounted for over 40% of 2015 sales. Korea is the other main market
accounting for 23% of 2015 sales. In 2016, the company benefitted from a free trade agreement with Turkey, which became its largest market
representing 30% of sales. The company expects Southeast Asia and Turkey to remain key markets in the near term.
Disclaimer: The information contained in this document is intended only for use by the person to whom it has been delivered
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and should not be disseminated or distributed to third parties without our prior written consent. Please refer to the relevant
product documentation (including product sheets and prospectuses) for terms and conditions of the product(s) referred to herein.
DBS accepts no liability whatsoever with respect to the use of this document or its contents.
For Accredited Investors (AI) and/or Professional Investors (PI) ONLY. Credit Flash 27 October 2017
Corporate Structure
Worst Case Scenario: Investors take on credit risk of the issuer when investing in these products. Market prices can drop significantly if any credit event occurs.
Note: Please approach your relationship managers (RMs) if you have any doubt on product suitability and risk rating.
Disclaimer: The information contained in this document is intended only for use by the person to whom it has been delivered
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and should not be disseminated or distributed to third parties without our prior written consent. Please refer to the relevant
product documentation (including product sheets and prospectuses) for terms and conditions of the product(s) referred to herein.
DBS accepts no liability whatsoever with respect to the use of this document or its contents.
For Accredited Investors (AI) and/or Professional Investors (PI) ONLY. Credit Flash 27 October 2017
Analyst Certification
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies
and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation
was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. DBS Group has procedures in place to
eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research
analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and
procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately.
There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.
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and should not be disseminated or distributed to third parties without our prior written consent. Please refer to the relevant
product documentation (including product sheets and prospectuses) for terms and conditions of the product(s) referred to herein.
DBS accepts no liability whatsoever with respect to the use of this document or its contents.
For Accredited Investors (AI) and/or Professional Investors (PI) ONLY. Credit Flash 27 October 2017
2. DBS Bank Ltd. performs or is expected to perform market making activities in fixed income securities of the issuer(s) or company(ies)
mentioned in this Research Report.
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