Nickel Asia’s stock price soars on earnings prospects following Indonesia’s nickel export ban

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Outlier

By Lourdes O. Pilar
Researcher

INVESTORS took positions on Nickel Asia Corp. following the news of Indonesia’s ban on nickel exports, in which the company is seen to benefit in increase ore production in order to supply the market demand.

A total of P3.063 billion worth of 706.93 million shares were traded from Sept. 2-6, data from the Philippine Stock Exchange (PSE) showed. This made Nickel Asia the most active stock last week.

Shares closed at P4.32 apiece on Friday, up 57.7% week on week from the P2.74 finish on Aug. 30. For the year, the stock has gained 94.6%.

“The stock drew attention following a reported plan of the Indonesian government to impose a ban on its nickel exports next year, which will give a squeeze to supply. [Nickel Asia] is one of the largest nickel miners in the country,” said Philstocks Financial, Inc. Research Head Justino B. Calaycay, Jr. in an e-mail.




Unicapital Securities, Inc. technical analyst Cristopher Adrian T. San Pedro also said that traders and investors bought Nickel Asia shares on the news of Indonesia’s ban on nickel exports, which could “lead to the shortage of minerals and nickel price surge in the global market.”

In addition, Mr. San Pedro noted the possible closure of a plant owned by Metallurgical Corp. of China (MCC) that spilled mine waste into Papua New Guinea’s Basamuk bay.

“[The news of the possible closure] is getting the local and foreign investors to become excited as they pick the Philippines as the next alternative for the source global nickel demand,” Mr. San Pedro said in a separate e-mail.

A nickel processing plant owned by Metallurgical Corp. of China, a unit of China Minmetals, is facing the threat of closure following reports of the plant’s waste spilling into the Basamuk Bay in Papua New Guinea, according to a report by Reuters.

Meanwhile, Indonesia announced last Monday that they would stop nickel ore exports starting Jan. 1, 2020, which is two years earlier than earlier announced, in an effort to produce its own resources at home.

The move is seen to increase nickel production in the Philippines. The country is the world’s second-biggest supplier, estimated to account for a fifth of the global mined nickel supply only next to Indonesia. Of this, Nickel Asia accounts for about half of the Philippines’ nickel ore output.

Nickel Asia reported an attributable income of P566.11 million in the second quarter, 39.4% lower than P934.28 million in the same period in 2018. For the first half, attributable income is P713.75 million, 48.7% than P1.39 billion in 2018’s comparable six months.

“Numbers have been relatively flat to negative for [Nickel Asia], and if the ban does come around, we may see an improvement in its numbers going forward,” Philstocks’ Mr. Calaycay said.

However, he cautioned that this “knee-jerk” reaction in its share price “may need something more concrete than this news to keep it moving higher.”

For Unicapital’s Mr. San Pedro: “The stock is a potential trend reversal candidate as we head towards the fourth quarter. Support is expected at P4.00 and P4.11 while resistance is at P4.69 and P5.10.”

“I expect the stock to remain bullish with a target of P5.74 and P6.00 for as long as it holds above P4.00 in the short term,” he added.

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