A-Rank Berhad is principally involved in the manufacturing and marketing of aluminium billets which remains the core focus of the Group since its inception. The Group is the largest aluminium remelt plant and supplier of secondary aluminium extrusion billets in Malaysia. They are also one of Asia’s leading suppliers of secondary aluminium extrusion billets. Currently, it has an installed capacity of 132,000 metric tonnes per annum. The Group presently exports about 38% of its revenue and its export markets include Africa, Europe, South Asia and South East Asia. Therefore, the main market of A- Rank is in Malaysia. The company has exposed to currency risk, higher Dollar value will have negative impacts on the group’s performance and vice versa.  If USD/MYR has strengthened by 3%, profit before tax will reduce about 892,018. The reason behind this is that the raw material which is aluminium ingots are imported and priced in USD thus subjecting the Group to currency exchange risk.

The company has got two segments, aluminium and property. In fy2022, aluminium segment earned 19million net profit, while property segment lost 4million. In fy2021, aluminium segment earned 11million net profit, while property segment lost around 3million. The ROIC and ROE of the companies were pretty low about 10% in FY2022, one of the main reasons is that the country need to buy a lot of inventories as it relies on the suppliers to supply the raw materials, another reason is that the property segment dragged down the performance of the company. The company also requires capital expenditure to maintain in the business, therefore the company generated about 1.5million free cash flow a year.

Even though the company gearing ratio is at 40%, it seems not to be high, but the company needs to repay term loan and lease liabilities of about 10 million. Given that the company generates low free cash flow, the company may need to borrow money again to repay the debts. The current amount of debt is about 100million.

At the price of 0.54, both enterprise multiple and pe ratio are about 5. Do you think that the company is attractive a the current price given that it is working in a cyclical industry , has high debt amount, and low free cash flow generation capacity?

Disclaimer: This information is intended for educational purposes only. It shall not be understood or construed as, financial advice. It is very important to do your own analysis before making any decision

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Raymond Lim, CFA