MSC (5916) - Malaysia Smelting Corp - A miner that shakes the tin market

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Malaysia Smelting Corp
Malaysia Smelting Corp is a company with a history of more than a century. It is involved in tin mining and tin smelting.
Tin has a wide usage on both industrial and consumer segment. Soldering, tin plate, tin chemical and lead acid batteries are the major four application of tin. China, Indonesia and Malaysia are the major tin producing countries while China, USA and Japan are the major consumption countries.
Malaysia Smelting Corp has an annual smelting production of 27,000 tonnes per annum. Roughly 4,200 tonnes of tin concentrates are mined from Malaysia and the rest are imported from its associates which span around the globe.
 Here is a list of Malaysia Smelting Corp Associates and investment and its relevant stakes:
·         40% stake in Redring Solder Malaysia, which is involved in manufacturing and sales of solder product
·         35% stake in Guilin Hin Wei, which is a dormant company
·         30% stake in KM Resources, which is involved in mining of copper, gold, zinc and silver
·         40% stake in Africa Smelting Corp, which is a dormant company
Recently, Malaysia Smelting Corp has conduct a series of corporate action, disposing its non-tin business and focusing on tin concentrates supply chain. In 2011, it has conduct a dual listing in SGX and dispose its interest in Australia Oriental Mineral and Asiatic Coal. Malaysia Smelting Corp acquire 80% of SL Tin in 2014, which has a 15 years mining lease at Sungai Lembing, Pahang. Malaysia Smelting Corp has been aggressive in securing tin concentrates after PT Koba Tin ceased its operation in year 2013.
Malaysia Smelting Corp has seen a declining revenue since 2011, alongside with the falling LME tin price, while its core profit has maintain at its 2012 level due to strong cost control by the management. However, impairment on receivables remain a big issue for Malaysia Smelting Corp. It has a relatively strong balance sheet, which cash and cash equivalent standing at 103 million and borrowings worth 83 million.
Yunnan Tin in China, PT Timah Persero in Indonesia and Minsur SA in Peru are the major players in tin production. Malaysia Smelting Corp has the second largest tin production but its market cap lags its peers for billions.
·         Strong ROCE over the years
·         Diverse source of tin ore helps to prevent any supply disruption
·         Significant pricing power as MSC is the world second largest producer
·         Short mining lease
·         Lack of available land for mining
·         Small area of mining tenement granted by state authority
In short, Malaysia Smelting Corp is a good proxy for tin price recovery and an indirect proxy to the future economy which relies on electricity and battery. Its valuation still lagged its peer and we believe the market would eventually fill up this mispricing gap.