Eonmetall Group earnings forecasts raised

PETALING JAYA: AmInvestment Bank has raised its FY18-19F net profit forecast for Eonmetall Group by 13% and 28% respectively based on the company’s strong earnings growth.

AmInvestment Bank maintained its “buy” call on Eonmetall with a higher fair value of 97 sen from 78 sen previously. This is a 30% premium to its closing price of 74.5 sen yesterday. Some 441,400 shares changed hands.

“We like Eonmetall for the growing acceptance by palm oil millers in Malaysia and Indonesia for its oil extraction plants. It enjoys good margins for these oil extraction plants in the absence of competition, coupled with the in-sourcing of inputs (steel products and metalwork machinery) used in the fabrication of these plants.

“Generally, steel products, metalwork machinery and oil extraction plants each contribute about a third to the group’s earnings,” it said in a report yesterday.

The net profit forecast was raised to reflect the revenue recognition from the solvent extraction plant (SEP); product and capacity expansion; and diversification and overseas expansion.

Eonmetall offers the sale of SEP to palm oil mills via outright sales and build-operate-transfer (BOT) or joint venture (JV) basis, and is currently in talks with a public listed company to build several palm-pressed fibre oil extraction (PFOE) plants on a BOT basis.

The arrangement for the PFOE plants are expected to be finalised in 2H’17. Eonmetall is also making inroads into Indonesia, offering its SEP to the palm oil mills on either a BOT or JV basis.

AmInvestment Bank noted the increase in Eonmetall’s production capacity for manufacturing of downstream steel products by 100% to 30,000 tonnes per annum, and machinery and equipment (M&E) by 60% to 80 units per annum.

The downstream products include hypermarket racks, new boltless, racking with galvanised materials, furniture racks and livestock (broiler/breeder), while the M&E product is deformed bar.

In terms of expansion, the company plans to expand its business overseas via a JV for steel processing plant in the UAE (2HFY17) to cater to the demand of downstream steel products in the Middle East and North Africa (MENA) region.

It is also planning a JV for steel racking manufacturing plant in the UAE (2HFY17) and Bangladesh (1HFY18), to cater to the demand in MENA and South Asia region.

Eonmetall’s business is divided into three core divisions namely steel and trading, M&E and engineering, procurement, construction and commissioning (EPCC).

The steel and trading division produces steel products such as cold-rolled coils, galvanised coils, slotted angles and steel racking system. This division has been the core contributor to the company’s top line, accounting for about 75% over the past five years.

The M&E division products metalwork machinery such as cold rolling mills, metal forming machines and continuous galvanising lines while the third division provides EPCC works on solvent oil extraction plants.