[Humbled Investor] Malaysia Smelting Corporation - MSC

[Humbled Investor] Malaysia Smelting Corporation - MSC

[10 Key reasons on why you should relook at MSC]

1. Even without the participation of institutional investors, MSC has surged 230% with minimal selling pressure. When big insti funds starting to notice MSC, potential gains might further be unleashed.

2. Straits Trading, the parent company of MSC (with 54% shareholdings in MSC) has gained more than 80% in less than 3 months.

3. MSC is also dual listed in Singapore. Current share price surged to 71sen. Arbitrage can be applied here.

4. Production curb and output cuts by Top 1 and Top 2 refined tin producers in the world (PT Timah and Yunnan Tin) back in 2019 and first half of 2020 has successfully balanced out the oversupply situation in 2020. Smelters in Yunnan Tin have also taken maintenance downtime to compensate for the shortfall of raw material.

5. Recently in 2021, Myanmar military coup + LME market dwindling tin inventories might have just squeezed the tin supply even further and resulted in tin shortage/deficit. Hence, tin prices could possibly stand above 20k as supply is struggling to meet resurgent demand.

6. Global tin demand is recovering, due to the rising electronic sales as more people stay at home due to the pandemic. With the rollout of 5G networks and EV which require at least 25% more chips and hence demand for tin soldering (which is the biggest use of tin) in order to connect components.

7. China's internal supply dynamics seem to be struggling to keep up with current demand, let alone finding sufficient mine resource to meet future soldering demand.

8. Tin remains as the metals most impacted by new technology with its wide application and storage capability in terms of battery storage. Tin improves conductivity and tin foils could be used instead of copper anode in replacing lithium-ion batteries.

9. MSC Tin Mining segment is expected to contributed positively which is attributed by its new mine at Sungai Lembing and increased daily average production at existing mines. Both are currently operating at full capacity.

10. Both Butterworth and Pulau Indah smelters of MSC are in operations (albeit at 25% capacity for new smelter but refurbished with better efficiency) which will increase refined tin output to meet current high demand.

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All information provided here should be treated for informational purposes only. It is solely reflecting author's personal views and the author should not be held liable for any actions taken in reliance on information contained herein.

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[Humbled Investor] MSC (Malaysian Smelting Corporation) - World's Top 3 Tin Smelter in the World

[MSC (Malaysian Smelting Corporation) - World's Top 3 Tin Smelter in the World]
The hidden real gem!!

If you have followed us since the start of our page (in April 2020), you would know that we are huge fans and promoters of MSC.
And time has proved us right, MSC's share price has gained more than 100% in less than a year. Let the bull run and it will hit our TP3 and TP4 soon enough.

With new smelter (TSL furnace technologies) commencing operation in 1Q 2021 which will increase the existing capacity by another 50% together with higher tin prices and reduced labour costs are definitely going to result in better performance results going forward.

With the new smelting facility at Pulau Indah which acts as the transportation hub, it would be more efficient in importing and exporting tins. New tin mining sites with huge potential is going to benefit MSC with current tin prices at USD20k/tonnes.

One thing is clear, from the lead acid batteries to advanced lithium ion batteries and to the next game changer - i.e. solid state batteries, it is clear that going forward, there are multiple opportunities for tin compounds and tin alloy to be featured in tin soldering and apply in anode technologies of EV batteries.

Our verdict is to never let go of good managed company with the right trend and bright future outlook and continue to hold till our TP5 which is shared in our telegram group.

Stock price has run ahead of results but fundamentals and prospect remain unchanged. Chase the price now would be risky. Hence, own due diligence and risk management is required before investing in MSC.

Feel free to join our telegram group for free at
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And of course, we are giving away our analysis for free! "Like" this post and comment "pm" below if you would like to have a copy of our analysis done on MSC few months ago.
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All information provided here should be treated for informational purposes only. It is solely reflecting author's personal views and the author should not be held liable for any actions taken in reliance on information contained herein.

No buy call. No sell call. No bullshit. Only content.

If you think the article / information is useful to you, you can <SHARE> this article and support us by <LIKE> and <FOLLOW> our Facebook page "Humbled Investor". Thank you so much for supporting.

Potential stock with Bright Prospect - MSC

In case you might not familiar with MSC's future prospect, we have summarised all the important catalysts and detailed them into the analysis report in terms of the direct benefits associated from the new smelter facility (that is said to increase their annual production capacity by 50%) and the key risks that you should be aware of.

There are 2 more catalysts that we have shared in the detailed analysis report which could further convince you in this stock to consider investing for the long run (hopefully).

To unlock the full detailed company analysis report on MSC, you are required to:

(i) LIKE and FOLLOW us on Facebook;

(ii) COMMENT "MSC"; and

(iii) SHARE this Facebook post.

These encouraging actions are a BIG support to us that motivates us in providing more useful content to you. We will try our very best not to fail or disappoint you

Only those who have completed all the 3 steps above are entitled to the comprehensive analysis report ya~

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All information provided here should be treated for informational purposes only. It is solely reflecting author's personal views and the author should not be held liable for any actions taken in reliance on information contained herein.

No buy call. No sell call. No bullshit. Only content.

If you think the article / information is useful to you, you can <SHARE> this article and support us by <LIKE> and <FOLLOW> our Facebook page "Humbled Investor". Thank you so much for supporting.

4. How to determine the right value for POTENTIAL growth stock like MSC?? Don't miss it! [PART 2]

Episode 4: Malaysia Smelting Corporation Berhad (MSC) [PART 2]

Today, we will be discussing about the key challenges faced by MSC and the financial aspects of MSC.

Previously in Part 1 (Episode 3), we discussed about the business model of MSC and its future growth prospects. We discussed how MSC's production capacity is set to increase as high as 50% annually from 40,000 tonnes per year to 80,000 tonnes per year.

If you missed the previous post, you may refer to the link here (would recommend you to read the previous article to have a full picture of MSC) 

Link here: https://humbledinvestor.blogspot.com/2020/05/3-is-tin-mining-sunset-industry

1. What are the weaknesses found on MSC?

Weakness here means the challenges faced by MSC. Basically, there are 2 key risk factors faced by MSC which are the (i) fluctuation of global tin prices and (ii) forex risks. However, do note that both of the risks here is non-controllable by MSC as the prices are adjusted based on macroeconomic factors.

(i) Let's talk about the global tin prices. If we look at the tin prices extracted from LME for the past 10 years (looking at a longer horizon), we noticed that the tin prices is at near to historical low level. This is identical to MSC's share price for the past 10 years. We could deduce that MSC share price correlate with tin prices. But what we should concern about is the price of tin moving forward. If the price of tin continue to go up, MSC share price will follows. And of course the price of tin would be determined by the demand and supply in the market. Let's find out more. 

According to ITA ("International Tin Association"), China, being one of the biggest importer of tin in the world, is set to import more tin and returning to normal levels of imports after reviving the economy from the COVID-19 lockdown.

Based on latest customs data, China imported 4,000 tonnes of tin-in concentrates in March 2020, an increament of 11% y-o-y while refined tin imports reached 1,180 tonnes. This has surpassed the largest monthly imports since January and February last year, indicating higher demand from China.

Due to the outbreak, Indonesian tin miner PT Timah will delay exports of refined tin and reduce its monthly output by 20% to 30% because of reduced demand. This represents the supply cut. With the recovery of demand and the supply cut by the top 2 tin miner in the world (PT Timah), we expects the tin price to slowly recover. However, no signs of production cut by MSC so far. Reasons for this may find in this article as explained by MSC's CEO himself: https://www.thestar.com.my/business/business-news/2019/09/14/mscs-tin-output-to-remain-firm-despite-global-cuts

In conclusion, we expect the price of tin to recover in the next half of 2020 provided the corona virus outbreak can be contained.

(ii) MSC is exposed to foreign exchange risks mainly in USD and SGD. The USD forex risks are minimised as majority of the purchases and sales are transacted in USD.

In order to mitigate the risks to an acceptable level, MSC uses derivatives such as forward tin contracts and forward currency contracts to manage the risks.

Besides, lack of available land for mining, short period of mining lease and small area of mining tenement granted by state authorities are some of the key challenges faced in tin mining industry in general.

2. How did MSC perform over the past 10 years?

Over the last decade, the century-old tin mining and smelting group reported five years of losses, totalling nearly RM300 million, and five years of profits, amounting to RM200 million. It suffered losses in 2008, 2010, 2012, 2014 and 2015, and made a profit in 2009, 2011, 2013, 2016 and 2017. In contrast, it enjoyed 14 straight years of profitability after it was listed on Bursa Malaysia in 1994.

Based on the chart below, briefly we can see that the net profit margin is improving. 
However, we will not go into details on the past performance. Instead, let's discuss future expected performance.

Once the new smelter in Pulau Indah ready to commence operations, the management will expect high operating costs as they will continue to operate the old smelter and new smelter in parallel (at the same time), with only one generating revenue. This is to ensure that the day-to-day operations is not disrupted by the new smelter in case of any technical issues.

MSC's CEO, Mr. Patrick Yong expects the doubling of operating expenses will affect its bottom line, until the operations at Pulau Indah stabalised which he expects would be by end of 2020.

Not only that, with the high capital expenditures spent on acquiring the new smelting facility at RM130 million, purchasing the plant for RM50 million and spending for refurbishment for RM80 million. These costs that have been incurred will be capitalised as PPE and will start to depreciate once the facility is ready to use which is expected in 2020. This will trigger depreciation charge which will further reduce the net profit although it is only an accounting impact.

3. Is the management reliable? Please discuss and analyse about the management of MSC.

This company has a little bit of history in their management profile over the last 10 years. As we gathered, there are 15 resignations happened to their board of directors over the past 4 years. This include CFO which has been changed 4 times. The reshuffle of management with NED, NINED, CEO, CFO, COO and secretary has been a good drama for the past 4 years. 

However, with Mr. Patrick Yong on board as CEO since 2016, would give the market more confidence over his management style. He was the managing director of M Smelt (C) Sdn Bhd, a wholly-owned subsidiary of MSC. He has more than four decades of experiences in global business operations in several business areas including leadership, research and development of international marketing and sales organisation.

In one of The Edge article Dec 2018, he reassured to his investors on the company's prospect and explained that when the CEO of the company is continuously buying shares but with small volume, it represents the CEO's confidence in the company. This is what he said: "Personally, I have a lot of confidence in this company. The industry’s prospects and business outlook are tremendous."

Unfortunately, he does not hold substantial interests in the company, he only holds 0.07% or 278,000 shares in MSC as 29 March 2019. 

4. How to value MSC? What is the fair value of MSC?

This time, let us look from another perspective to value the company. Previously, I have mentioned the key advantages / opportunities of MSC (after the new smelter commence its operation) which I will summarised as follows:

i) operational cost will reduce
ii) annual production capacity will increase by 50%
iii) labour cost will reduce
iv) carbon footprint will improve
v) Overheads will increase before new smelter become fully operational
vi) the land in Butterworth can either be developed or sell at a gain

I would like to focus on the last point here.

In Sept 2018, MSC and its 53% shareholder, Straits Trading (STC) have signed an MOU to jointly explore options on UNLOCKING the value of land owned by both parties in Butterworth, Penang. What is interesting here is that this land is not referring to the old smelting plant which spans 13.9 acres, but rather this land is a neighbouring adjacent land to the smelting plant totalling 26.2 acres. On a combined basis, we are looking at a combined land area of sizeable 40.1 acres.

With the MOU in place, there is a better collaboration between MSC and its majority shareholder in unlocking the value of this prime land with great redevelopment potential and maximizing the returns for both parties.

According to 2018 Annual Report, there are 3 options where both parties are considering which are:

1. joint ventures with partners (I assume is developers) to develop the land 
2. Develop the land on their own
3. Land sales

For your further information, the land is FREEHOLD land and is in close proximity to Penang Sentral which is the key transportation hub for Penang connecting railway, ferry and bus service. It also has a panaramic view of Penang Island as shown in the picture below. Furthermore, following the PTMP (Penang Transport Master Plan) implementation, the transportation infrastructure will improved significantly.

Attached is the Penang's map and the location of both land parcels.

This means that the land has the potential to be valued as TOD (transit-oriented development) which could fetch higher value compared to normal land due to appealing location to wide range of investors and developers. In Feb 2020, Mr. Patrick Yong has explained that MSC will not be involved in the development of land itself, but rather STC will take over the projects as they have the know-how and experiences in this sector. Besides, he also said the development land has been approved as "mixed development" and initial works has already started on the ground.

The Butterworth land would then be revalued upwards. As at 31 December 2018, the land held for development is valued at RM78.654 million as shown in the FY2018 Annual Report.

Net tangible asset per share of RM0.89, compared to current price RM0.715, has a upside potential of ~25%, without factoring the full operational value of the new ISASMELT smelting plant YET.

Let me know your thoughts on this and if there is any points I missed out or you would like to highlight to me. But all in all, I would think MSC has a great potential in near future and MSC is definitely a great company to invest in, at a fairly cheap price. 

Simple valuation metrics for your reference:

ROE: 9%
ROA: 4%

PE ratio: 8.54
NTA per share: RM0.92

Current ratio: 1.59 (healthy)
Dividend payout: 24% (Preserve cash for investment)
Gearing: 0.9 (High capex for new smelter)

“Today, very few people know about tin smelting. This is not something that you can start today, stop tomorrow, and then restart production the day after tomorrow as you like. If the equipment is not being used, it will start to rust. It is a very high-barrier-to-entry and labour-intensive business.” Mr. Patrick Yong explains.


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All information provided here should be treated for informational purposes only. It is solely reflecting author's personal views and the author should not be held liable for any actions taken in reliance on information contained herein.

No buy call. No sell call. No bullshit. Only content.

3. Is tin mining a sunset industry? Here's 7 reasons why MSC will be a growth stock in near future [PART 1]

Episode 3: Malaysia Smelting Corporation Berhad (MSC) [PART 1]

Malaysia Smelting Corp (MSC) is the world's third-largest refined tin maker. It is currently dual listed on Bursa Malaysia and Singapore Exchange. MSC is 54.8% owned by Singapore oldest companies - The Straits Trading Co Ltd.

Today we will be discussing MSC's future growth prospect. Note that there are not many analysis (on MSC) covered by any famous blogger or fund manager / investment bank that I knew of but I think this company will be the one of the stock worth investing, either from a value investing perspective or growth investing perspective. Let's find out why.

1. What is MSC's business model?

The revenue of the company can be categorised into 3 segments:
i) tin mining;
ii) tin smelting; and
iii) sales of refined tin metal and by-products.

Tin smelting involves smelting of tin concentrates and tin bearing materials and the production of various grades of refined tin metal. However, note that less than 10% of the smelter's inputs are from MSC's own mines. The remaining 90% of tin ore (raw materials) are sourced from locally and outside of Malaysia. 

The process of tin smelting starts from the tin mines. Tin ores will be extracted from the mines and then processed into tin-in concentrates. Tin-in concentrates are then converted into refined tin metal products through the tin smelting process using the smelter.

2. What is the usage of tin and how is the demand? Isn't tin mining a sunset industry?

Tin is used in various products ranging from food packaging to smartphones, electric vehicles and solar cells.

While there is a rapid growth of solders due to wide application of tin and the rise of semiconductor industry today, there will be further usage of tin especially in the emerging lithium-ion batteries for electric vehicles. Tin metal which is recommended to be used in the batteries for electric vehicles (for example, Tesla battery pack) is mainly due to the potential increase in energy storage capacity which will then improve the charging rate of the battery. 

The increase in energy storage capability of tin leads to other areas of growth such as renewable energy generation and storage, as well as advanced computing and robotics.

The Group CEO, Mr. Patrick Yong predicted that the future demand is expected to come from new applications in energy-storage technologies. In particular, the demand will be coming from the rise of tin usage in lithium-ion batteries as more automotive manufacturers push for electric vehicles.

According to International Tin Association (ITA), tin is called the ‘spice element’ because a little of it is present everywhere in ways that are essential to our quality of life. Tin use in vehicles is a good example.

Below are the tin prices extracted from LME (London Metal Exchange) from 2015 to today:

The average tin prices are as follows (extracted from KLTM Kuala Lumpur Tin Market):

2015 - USD16,068/tonnes 
2016 - USD17,867/tonnes (11% y-o-y)
2017 - USD20,036/tonnes (12% y-o-y)
2018 - USD20,067/tonnes (0.15% y-o-y)
2019 - USD18,616/tonnes (-7% y-o-y) 

More recently tin demand has been significantly impacted by macroeconomic shocks, first the US-China trade war and now the covid-19. According to ITA, it will take some time to recover inevitably, although there are good reasons to expect a strong rebound.

Having said that, Mr. Patrick Yong said that the cost of mining will prevent tin price from falling below the global average mining cost, which he believed is around USD15,000/tonnes, for hard rock mining. In fact, ITA has predicted the upper range to be around USD25,000/tonnes. Therefore, it is not difficult to guess where the betting man is putting his money given the near-to-all-time-low tin prices. 

The longer-term future looks very promising, with very significant opportunities in new electronics technologies and in energy opening up for tin towards 2025-2030.

3. Other than the demand of tin, is there any other growth prospects for MSC?

Since year 1902, MSC has been using outdated reverbatory furnaces for tin smelting operations. The smelting plant is located at Butterworth, Penang and is now more than 100 years old. The old smelting furnaces involves a multi-stage procedures which is not operationally efficient. 

In mid 2016, MSC has acquired an existing production facility in Pulau Indah, Klang for RM50 million. The purpose for this is to relocate its smelting operations from Butterworth to Pulau Indah. Not only that, the management aimed to retrofit the smelting plant in Klang to be one of the most modern tin smelter which equipped with ISASMELT TSL (top submerged lance) technology. To be exact, when MSC bought over, it is said that they have found this brownfield opportunity whereby the plant that is being acquired is itself in the form of LEAD smelter, already installed with the latest TSL technology furnace. (As such, lower time cost needed to complete the new facility in Pulau Indah)

This is where things get a little bit interesting. 

With the cutting edged TSL technology, MSC aimed to be one of the lowest-cost smelting facilities company in the world. The ISASMELT process is a energy-efficient smelting process. The furnace uses natural gas as fuel and involves only single stage melting. With the commissioning of the new smelting facility which is expected to be on track and operational in the near term (2020), this will definitely improve the smelting process efficiencies and the operational costs will be significantly reduced.

According to Group CEO Mr. Patrick Yong, the new smelter will boost extraction yields and the annual production capacity will increase from 40,000 tonnes per year to 80,000 tonnes per year with an increment over 50%, WITHOUT incurring any additional capital expenditure going forward.

Not only that, the new furnace will be utilising renewable energy with rooftop solar panels and tapping heat from the furnaces, recycling energy from operating thermal wastage. This will significantly reduce the carbon footprint. With that, MSC will gain goodwill advantage especially dealing with European customers.

The plant in Butterworth will still be in service to ensure problem-free production. MSC expects full migration of smelting activities to the new plant to be completed by 2020. Having said that, labour costs will be significantly reduced. Reduction in manpower has resulting in laying off workers with VSS amounting to RM15 million given to 550 employees. 

In addition, the location of the new smelter is very strategic as Pulau Indah is located beside the most busiest shipping route in the world, the Straits of Malacca. Pulau Indah is  the industrial hub for many companies include Tadmax, Scientex, Kawan Food, MISC, IKEA distribution centre. The strategic location will benefit MSC as the LME (London Market Exchange) warehouse is also located at Port Klang.

However, given that the plant in Butterworth will still operate as usual before new smelter is fully operational, the management expect overheads to increase as they run two smelting plants at the same time. 

Once the move is completed, the management expects to be operationally efficient. At the same time, the land located in Butterworth can be either developed or sell off and make a handsome gain which will improve the group's cash flow and potentially a special dividend will be paid.

As a summary:

i) operational cost will reduce
ii) annual production capacity will increase by 50%
iii) labour cost will reduce
iv) carbon footprint will improve
v) Overheads will increase before new smelter become fully operational
vi) the land in Butterworth can either be developed or sell at a gain

With that, where do you think this company will be heading to over the next 5 years?

In the next episode, more information will be shared such as what are the external factors which could significantly affect MSC, how does the company performed throughout the years, what are the risks involved and how does management react to mitigate the risks? 

Management leadership, global tin prices, forex risks, mining licenses, dividend payout, competitor analysis, valuation of MSC etc will be shared in the next article.

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Lastly, for those who like to know more about TSL furnace, here is a sample video to explain what is it about:

All information provided here should be treated for informational purposes only. It is solely reflecting author's personal views and the author should not be held liable for any actions taken in reliance on information contained herein.

No buy call. No sell call. No bullshit. Only content.