Malaysia Smelting Corporation Berhad - More Than a Smelter
Mon, 08-Jun-2026 07:52 am
by Research Team • Apex Research

Counter

MSC (5916)

Target Price (RM)

3.06

Recommendation

Buy

• The tailings scavenging plant remains on track for 3QFY26 commissioning and is expected to increase mining output by 40-50%, supporting higher self-generated feedstock.

• Management targets ore feed intake of c.21,000 tonnes in FY26, supporting a gradual recovery in smelting utilisation.

• The RM10m mini-smelter project remains on track for 3QFY26 completion, further strengthening operational integration.

• We maintain our FY26F-FY28F earnings forecasts, BUY call and TP of RM3.06, based on 13x FY27F EPS of 23.5 sen.

 

We left MSC's briefing with the following key takeaways:

 

Tailings scavenging plant to drive higher mining output. The tailing’s scavenging plant has been successfully commissioned and is currently undergoing final optimisation ahead of commercial operations, which are expected to commence in 3QFY26. Upon full ramp-up, the facility is expected to increase mining output from c.10 tonnes per day to 14-15 tonnes per day, implying a potential 40-50% increase in production. Given the relatively low incremental labour and energy requirements, we expect the majority of the additional output to flow through to earnings. We view this positively as it accelerates MSC's strategy of increasing self-generated feedstock while enhancing the profitability and sustainability of its mining operations.

 

Feed intake outlook improving despite market tightness. Management expects ore feed intake to increase to c.21,000 tonnes in FY26 from c.19,000 tonnes in FY25, supported by stronger engagement with artisanal miners, direct sourcing initiatives and renewed commitments from trading partners. While competition for ore feed remains intense amid ongoing supply disruptions in Myanmar and aggressive sourcing activity from Chinese buyers, the anticipated increase in feed availability should support a gradual recovery in smelting throughput and improve utilisation rates over the medium term.

 

Mini-smelter project enhances integration and utilisation. The RM10m mini-smelter project at the Rahman Hydraulic Tin (RHT) mine remains on track for completion in 3QFY26. The facility will enable ore concentrate to be converted into crude tin metal at the mine site before being transported to Pulau Indah for final refining. Besides improving logistics efficiency and reducing transportation requirements, management estimates the project could effectively release c.10 tonnes per day of smelting capacity at Pulau Indah. We view this positively as it strengthens vertical integration, enhances utilisation of existing infrastructure and provides greater flexibility to accommodate future increases in feedstock volumes.

 

Tin intermediates becoming less relevant to earnings quality. Tin intermediates inventory has declined to 1,291 tonnes from historical levels of c.6,000 tonnes as previously accumulated material continues to be monetised. We believe concerns surrounding the eventual depletion of tin intermediates are overstated, as the reduction primarily reflects improved processing efficiency and faster profit recognition rather than a structural deterioration in earnings quality. Going forward, earnings growth should increasingly be driven by higher mining output and stronger feed availability rather than inventory-related gains.

 

Earnings revision. We maintain our FY26F-FY28F earnings forecasts as the operational updates discussed during the briefing remain broadly consistent with our existing assumptions. While management's commentary provides greater visibility on project execution and feedstock procurement, the anticipated earnings contribution from these initiatives has already been incorporated into our forecasts. As such, no changes are made to our estimates.

 

Valuation. We maintain our BUY call and TP of RM3.06, based on 13x FY27F EPS of 23.5sen. We continue to favour MSC given (i) its unique positioning as the world's largest independent tin smelter, (ii) growing contribution from self-generated feedstock and increasing integration across the tin value chain. We believe the applied multiple remains justified by MSC's improving earnings quality, rising mining contribution and lower reliance on third-party feedstock, which should support greater earnings resilience relative to pure smelting businesses.

 

Risks. Key downside risks include tin price volatility, feedstock supply disruptions and delays in commissioning the sand-tailings facility, which could affect margin recovery and operational performance.

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