Thursday, July 11, 2013

Midas Holdings: Seeking more contract wins (OCBC)

Midas Holdings:
Fair value S$0.54
add: 12m dividend forecast S$0.005
versus: Current price S$0.44

Seeking more contract wins
• Recently clinched CNY44.3m metro order
• Healthy metro industry news flow
• New high-speed railway tenders still uncertain

Midas Holdings (Midas) recently clinched a CNY44.3m metro contract, thus bringing total YTD order wins to ~CNY423.2m. Looking ahead, Midas will continue to strive for potential new metro and international railway contract wins of ~CNY380-580m for the rest of 2013.
We are buoyed by the positive news flow happening in China’s metro industry, and see Midas as a key beneficiary given its track record as a supplier to major Chinese train manufacturers. However, the time frame for new high-speed railway train car tenders by the China Railway Corporation remains uncertain, although there is optimism that it could be resumed in 3Q13. Maintain our BUY rating and S$0.54 fair value estimate on Midas, pegged to 1.1x FY13F P/B.

Latest contract brings YTD orders win to ~CNY423.2m
Midas Holdings (Midas) announced recently that it has secured a CNY44.3m metro contract from CNR Changchun Railway Vehicles Co. for the Changchun Metro Lines 1 and 2 projects. This involves the supply of aluminium alloy extrusion profiles for 44 train sets (or 264 train cars), with delivery scheduled to take place from 2013 to 2015. This latest development brings total YTD contract wins by Midas to ~CNY423.2m. It also illustrates the positive momentum in China’s metro industry, given the development of new metro lines and upgrading of existing systems. Looking ahead, Midas will continue to strive for potential new metro and international railway order wins of ~CNY380-580m for the rest of 2013.

Positive news flow in China’s metro industry
According to a media report, China currently has 36 cities which have garnered approval to build urban rail transit systems. This may result in CNY4t worth of investments in this area by 2020, which we believe highlights the long-term sustainability of the rail transport sector in China. We expect Midas to benefit from this positive trend, given its strong track record as a supplier to major Chinese train manufacturers. Meanwhile, China’s cumulative railway fixed assets investments for Jan-May 2013 grew 21.6% YoY to CNY157.61b, according to the China Railway Corporation (CRC). This can be further dissected into a 25.4% and 4.8% YoY increase to CNY132.3b and CNY25.3b for infrastructure and equipment spending, respectively.

Maintain BUY, but delay in high-speed tenders poses risks
We keep our forecasts intact for now, and reiterate our BUY rating and S$0.54 fair value estimate on Midas, pegged to 1.1x FY13F P/B. While there is optimism that the highly anticipated new high-speed railway train car tenders by CRC may happen in 3Q13, the time frame remains uncertain and any further delays would pose downside risks to ours and the street’s estimates, as Midas’ manufacturing lines remain under-utilised.


Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 09/07/13

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