Bursa Malaysia Malaysia Smelting Corp (MSC), is one of the world’s leading integrated producers of tin metal and tin-based products. If you consider its net assets, about 2/3 is deployed for its smelting operations with the bulk of the balance for its tin mining operation. But when you look at the PBT over the past 12 years, 4/5 was from the tin mining operation. Is this then a smelting company with a tin mining arm or a tin mining company with a smelting arm? This has implications for its valuation. If this was a tin mining company, you would value it based on its tin reserves. If it was a smelting company, you would valued it based on its tin refining business. So what is the appropriate way to value it? For more details on MSC, refer to https://www.youtube.com/watch?v=A3u4mdV4fo8
MSC had run sharply ahead of 1Q2024 results, which would not have been able to match the superb results of $36mil in 1Q2023. Tin prices in the 1Q2024 were subdued at 25k-26k oer ton. So those who sold into that powerful move did well as the results were only $18 mil profit for 1Q2024 ; 50% lower than 1Q2023 !! But since end March 2024, tin prices have skyrocketted to 32k-34k per ton, and now doing 33,300 per ton. Meanwhile the stock collapsed from 3.47 to 2.48 , a drop of $0.99 in one month !! So now is a good time to accumulate after a big fall in share prices and a sharp increase in tin prices for the 2nd Quarter 24 , to anticipate a good 2Q2024 result out early Aug 2024. The following insights were announced/revealed/noticed during the Conference Call shortly after the 1Q 2024 results : 1 Tin division profits will be higher from higher tin prices 2 Sale of slag will bring in maiden revenue from new source 3 Smelting of intermediates going on with earnest. 4 Smelting of in house tin will provide good revenues 5 Smelting of 3rd party local sourced tin also going on 6 Smelting of foreign imported tin (from Congo etc ) resumed providing smelting division with good business 7 The decommissioning of the Butterworth smelter will reduce MSC's overall costs by 30%. Sure to be a positive boost to the bottomline. The 2Q2023 net profit was $28 mil. I believe with all the positive catalysts mentioned above, the 2Q2024 net profit should be higher than 2Q2023.
Looks like MSC stock price is following Tin's price very closely 😏. Malacca Securities report mentioned that we are in a commodity upcycle , that should be positive for MSC. Also the US$ is in a gradual spiral downwards with Powell signalling US rate cuts looming in the horizon , and since commodity prices move inversely to the US$ movements, tin is poised for better days ahead. Stay tuned for more exciting updates as we keep an eagle eye for fund flows out of the US mkts to the deeply undervalued Emerging Mkt space.
Affin Hwang came out with a note saying earnings will come in between 20-25 mil for 2Q24. They maintain their Sell recommendation with an unchanged target price of $2.30. They think the mining side will do well but the smelter side will not as their tolling operations will be impacted by the export ban/constraints of tin from Myanmar and Indonesia.
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GreenMinerMSC
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Posted by GreenMinerMSC > 2024-05-15 15:16 | Report Abuse
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