Malaysia Smelting Corporation Berhad - A Wet Setback for Mining
Wed, 19-Aug-2026 07:01 am
by Research Team • Apex Research

Counter

MSC (5916)

Target Price (RM)

3.06

Recommendation

Buy

·   RHT has been ordered to suspend mining from 12 August 2026 following damage to its drainage infrastructure.

·   No resumption timeline has been disclosed, while tin smelting operations remain unaffected.

·   We estimate a c.RM3.4m mining PAT impact per week of suspension, based on 2QFY26's RM44.1m mining PAT before NCI.

·   We make no changes to our FY26F-FY28F forecasts for now, pending clarity on the suspension duration.

·   We maintain our BUY call and an unchanged TP of RM3.06.

 

Temporary suspension of RHT mining operations. Rahman Hydraulic Tin (RHT), an 80%-owned subsidiary of MSC, received a directive from the Perak Department of Minerals and Geosciences (JMG Perak) to temporarily suspend mining operations with effect from 12 August 2026. The directive followed a site inspection after an extreme rainfall event on 3 August 2026, during which approximately 60mm of rainfall was recorded within one hour, exceeding the 50mm design intensity of RHT's drainage and retention pond infrastructure. This resulted in damage to certain drainage facilities and the retention ponds being overwhelmed.

 

RHT has commenced repair and upgrading works and is engaging with JMG Perak on a remedial action plan. The suspension remains in effect until further notice, with no indicative resumption timeline disclosed. Tin smelting operations at Pulau Indah are unaffected and continue as usual.

 

This is not RHT's first operational disruption, with the mine previously suspended for three weeks from 13 November to 3 December 2025 due to a separate water-related issue. The recurrence of water-related disruptions warrants monitoring, particularly if the current suspension proves prolonged.

 

Estimated impact. Management indicated that mining PAT would generally be reduced in line with the duration of the disruption. Based on 2QFY26 mining PAT of RM44.1m before NCI, we estimate a reduction of approximately RM3.4m in mining PAT per week of suspension, all else equal. On an attributable basis, this translates to approximately RM2.7m per week, based on RHT's 80% ownership. For illustration, a three-week suspension, similar to the previous disruption, would imply a c.RM10m reduction in mining PAT before NCI, or approximately RM8m on an attributable basis. This remains a simplified run-rate sensitivity, with the actual impact dependent on the eventual suspension duration and other mitigating factors.

 

Earnings revision. We make no changes to our FY26F-FY28F earnings forecasts at this juncture, as the duration of the suspension remains uncertain and management has indicated that the financial impact cannot currently be determined. We will revisit our estimates once greater clarity emerges on the resumption timeline.

 

Valuation. We maintain our BUY call and an unchanged TP of RM3.06, based on 13x FY27F EPS of 23.5 sen. At the current price of RM1.94, MSC trades at 12.5x FY26F and 7.7x FY27F earnings. While near-term earnings visibility has weakened following the mining suspension, we continue to favour MSC given its position as the world's largest independent tin smelter and its improving earnings profile.

 

Risks. Key downside risks include an extended suspension period at RHT, given mining now represents the Group's primary earnings driver; tin price volatility; feedstock supply disruptions; unhedged FX exposure; and further delays to ongoing capacity expansion projects.

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