Declining tin prices have raised concerns over Malaysia Smelting Corporation Bhd's (MSC) earnings. This said OSK Research, might force it to slash about 55.1 per cent of the company's financial year 2012 earnings.
The research house has also cut its financial year 2012 tin price
estimate to US$20,000 per tonne (US$1 = RM3.18).
"We had earlier warned investors of a potential earnings downgrade as tin prices fell on renewed concerns over Europe's growing sovereign debt crisis.
"On top of the tin price revision, we also incorporated higher mining costs at PT Koba Tin, as the sharp plunge in prices may have caught the company's management off-guard.
"As the shift from a higher cost mining pit to one of lower cost spurred by falling tin prices may take time and affect the company more severely, we are prompted to slash our 2012 earnings forecast for MSC drastically by 55.1 per cent to RM39.5 million," the firm said in a research note today.
OSK Research said however, despite the negative macro impact, MSC made efforts to expand its tin business in first half of the current financial year, including an extension on Rahman Hydraulic Tin's (RHT) mining concession, striking a strategic agreement with an influential Indon partner to extend PT Koba's Contract of Works (CoW), and establishing a presence in Africa.
For the financial year ended Dec 31, 2011, MSC, an integrated producer of tin metal and tin-based products, registered a core net profit of RM85.6 million on the back of RM3.098 billion, in revenue.
The research house is also trimming MSC's fair value to RM5.50 following the earnings revision, but yet maintained its "buy" call. -- Bernama
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