Asia Metal Public Company Ltd (AMC.BK) manufactures and trades processed steel. With two subsidiaries and two associated companies, Asia Metal produces steel pipes, provides cutting and modifying services, distributes steel products, and provides warehouse services. The company has a total production capacity of around 220,000 tons per year.[mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”] Asia Metal’s products are used in various industries, such as construction, furniture, electric appliances and automotive industries. The company operates in Thailand only.
Asia Metal was founded in 1993 and is headquartered in Samutprakarn, Thailand. The shares are listed on Thailand’s Stock Exchange since 2004. Major shareholders are the two company’s heads and their families with an ownership of together 54%. 33% of the shares are in public hand.
With a workforce of 329 employees, Asia Metal reported revenues of 1.3bn THB (40m USD) and a profit before tax of 169m THB (5m USD) in its first quarter 2017. This is an increase of 2% and 70% respectively compared to the same period a year ago. In 2016, revenues and profits increased 20% and 269% respectively, after two years of consecutive losses. Asia Metal’s major customer accounts for around 30% of the company’s revenues. The operating margin of 8% is relatively small compared to the industry average. Asia Metal had cash reserves of 73m THB (2m USD) at the end of March 2017. The company shows a solid balance sheet with an equity ratio of 57% and a gearing, defined here as total liabilities to total equity, of 76%.
After two consecutive years of decline, Thailand’s steel consumption grew again by 15% in 2016. ASEAN’s steel demand rose by 12% with an increasing urbanization as a key driver. The region is expected to maintain a steady growth of 5-6% over the next years. The recovery of steel prices in 2016 has also brought a more stable and sustainable operating environment for the steelmakers. Many ASEAN companies are gradually returning to profit path. However, the region remains vulnerable to currency volatilities and to increasing US interest rates.
Asia Metal shares are in an uptrend since February 2016 and tripled in value since. After a peak in February this year, the share price has been consolidating and are currently testing its rising 200-day moving average. The company is priced at only five times earnings compared to 45 times among its sector peers. The shares trade below book value and at four times cash flow only. The last dividend payment yielded 5%.
Asia Metal reported record sales in 2016 and was able to compete well in a market with excess capacities on a global level. The company comes with a healthy balance sheet and a relatively low valuation. We see good chances for a 20-30% price increase over the next six months.
AIS Rating: ★★★★☆
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 Q1 only |
|
|---|---|---|---|---|---|---|---|
| EPS (THB) | 0.24 | 0.35 | 0.34 | -0.04 | -0.5 | 0.73 | 0.3 |
| Change | 33% | 47% | -2% | -111% | -1270% | 246% | 36% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 5 | 45 | 0.9 | 4 | 57% | 21% | 76% | 5% |
* Equity / Total Assets, ** Total Liabilities / Equity
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