21 July 2023
Several risks continue to loom over nickel producers in 2023. However, the shares of PT Trimegah Bangun Persada Tbk (NCKL) are still considered an investment opportunity, supported by the company's financial performance and expansion.
In PT BCA Sekuritas’s research on July 20, 2023, quoted on Friday (July 21, 2023), PT Trimegah Bangun Persada Tbk emerged as one of the largest nickel companies in Indonesia, holding a strong position to achieve significant revenue growth.
This positive outlook is supported by its high production volumes, which have led to capacity expansions. Additionally, the company has established strong strategic partnerships, ensuring a smooth investment process.
“Trimegah Bangun Persada Tbk is also determined to monitor operating costs as a critical factor in maintaining a healthy margin,” quoted from the research report prepared by analyst Muhammad Fariz.
BCA Sekuritas predicts that Trimegah Bangun Persada will be able to achieve revenue growth of IDR 26.73 trillion and IDR 30 trillion in 2023 and 2024, respectively. These figures are expected to grow by approximately 179% and 12%.
Furthermore, the research report quotes, “NCKL’s EBITDA and profit offer attractive growth prospects as we project a CAGR of 48% and 63% for EBITDA and profit, respectively, from 2022 to 2025.”
EBITDA is predicted to reach IDR 5.38 trillion and IDR 14.43 trillion in 2023 and 2024, respectively. Meanwhile, its net profit is expected to reach IDR 6.32 trillion in 2023 and IDR 14.3 trillion in 2024.
The report also quotes, “Additionally, the company promises a dividend yield growth from 2% in 2023 to 7% in 2025, making it an attractive investment opportunity.”
Huge IPO to support the company's future projects
PT Trimegah Bangun Persada Tbk (NCKL), through its subsidiary PT Halmahera Persada Lygend (PT HPL), officially made its maiden nickel sulfate export to China today, June 16, 2023.
Despite the less encouraging prospects in the nickel industry, BCA Sekuritas believes that Trimegah Bangun Persada will navigate the situation successfully, given the company's strong cash position. The company raised IDR 9.99 trillion from its initial public offering (IPO) by offering 7.99 billion shares to the public at a nominal value of IDR 100 per share, with an IPO price set at IDR 1,250 per share.
“A strong cash flow will have future implications as it enables the company to invest in long-term nickel projects and continuously expand its business scale.”
BCA Sekuritas expects the company's free cash flow to achieve a compounded annual growth rate (CAGR) of 9% from 2022 to 2025.
Oversupply disrupts nickel market as nickel pig iron (NPI) and mixed hydroxide precipitate (MHP) rise
According to the research report by BCA Sekuritas, the global primary nickel market is currently facing an excess supply, driven by production and supply exceeding demand.
“The price of Nickel Pig Iron (NPI) is expected to remain challenging, with the industry facing supply disruptions for several years due to excess supply. However, the increasing supply of NPI from Indonesia poses a threat to NPI production in China,”
Furthermore, the nickel and cobalt sulfate markets are also under pressure due to oversupply caused by intense competition in the electric vehicle market. The emergence of Mixed Hydroxide Precipitate (MHP) and Mixed Sulfide Precipitate (MSP) in battery production offers promising opportunities, particularly for investment in High-Pressure Acid Leaching (HPAL) or processing and refining nickel ore with HPAL technology in Indonesia.
“Despite the specter of oversupply, the outlook for HPAL in the sulfate market remains positive,”
BCA Sekuritas recommends a “buy” rating for NCKL shares with a target price of IDR 1,690 per share based on the price-earning (PE) method.
“We have set the EPS for 2024 at IDR 228, and our target PE is determined at 7.4 times. We set this PE ratio close to that of global nickel and metal companies in 2024, considering the sector is expected to continue experiencing a downturn due to excess supply,”
The majority of profits in this sector come from volume growth and cost management. However, there are some main risks in this sector, including:
1. Declining nickel prices in NPI, MHP, and sulfate.
2. Low cobalt value affecting HPAL costs due to cobalt price volatility.
3. Regulatory and tax risks.
4. Operational risks and variability in nickel ore grades.
As of the closing of Thursday's stock trading on July 20, 2023, NCKL shares surged by 3.43% to reach IDR 905 per share. The opening price for NCKL shares was stagnant at Rp 875 per share. The highest and lowest levels for NCKL shares were IDR 915 and IDR 875 per share, respectively. The total trading frequency was 3,142 times with a trading volume of 281,835 lots of shares, resulting in a transaction value of IDR 25.3 billion.