Reasons to buy Midas for 2013 recovery

Midas Holdings: BUY S$0.36; Bloomberg: MIDAS SP
Poised for a turnaround;
Price Target : 12-Month S$ 0.50 (Prev S$ 0.49)
By: Paul YONG CFA +65 6398 7951

• We visited Midas’ production facilities in Luoyang, Nanjing and
Jilin recently
• The Group’s production capabilities and capacity has expanded
during this lull period
• Winning more orders from wider sources should help boost the
Group’s profitability
• Maintain BUY with TP S$0.50 (1x FY13 P/B)


Enhanced capacity and capabilities. Whilst orders have been slow in coming
through to Midas, it has been enhancing both its production capacity and
capabilities, in addition to diversifying its product range. Jilin Midas
now has an aluminium extrusion production capacity of 50,000 tonnes per
annum and can fabricate a complete range of train parts, including for
export.

More contracts to flow in, and boost profitability in 2013 and 2014. We
expect Midas to comfortably win orders of c. RMB1bn from metro, export and
the non-rail segments (power and other extrusion products) over the next 12
months, while high-speed train orders will depend on how soon the Ministry
of Railway (MoR) makes its purchases. If the MoR does order 400 train sets,
as people in the industry expect, we project that Midas could win c. RMB1bn
worth of high-speed train orders for delivery over the next 2-3 years.
Meanwhile, associate Nanjing Puzhen should also see an earnings turnaround
on its strong RMB8.5bn order book.

BUY for 2013 turnaround story, TP S$0.50. Midas is currently trading at
0.7x FY13 P/B, which we see as attractive for a turnaround story. We
believe the stock should re-rate as contracts start to flow in once again
for the Group. Our TP is based on 1x FY13 P/B.