Bauxite mining to help boost Malaysia's Tanah Makmur earnings

Bauxite mining is expected to help sustain Malaysia's Kuantan-based Tanah Makmur’s earnings in spite of lower net profit from its other business in the near term.

Some 1.2 million tonnes of bauxite were discovered on Tanah Makmur’s KotaSAS township land banklast year, The company started mining the aluminium ore mid-year.

Kenanga Research expects current mining operations to contribute RM65mil to RM92mil to financial year 2015 and 2016 (FY15 to FY16) revenue estimates.

“Furthermore, management has mentioned that preliminary studies indicate that there is another approximately 800,000 tonnes of bauxite reserves, which we estimate could contribute about RM140mil additional revenue in FY16-FY17 estimates, if confirmed,” it said. Net profit, however, would take a gradual beating due to lower CPO prices in FY15 estimates of RM2,200 per tonne or a 8% contraction year-on year.

Bauxite to be mined would also be lower in volume, 27% down to 400,000 tonnes, affecting FY16 estimates.

“Hence, we estimate Tanah Makmur’s FY15 and FY16 estimate core net profits to decline 3% and 1% to RM53.3mil and RM53mil, respectively,” the research house said.

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