Midas Holdings: Huge contract wins bolster earnings visibility

A slew of contract wins recently. Over the last week, Midas announced that it has won 4 contracts to supply aluminium extrusion profiles for various inter-city high speed projects worth a total of RMB775m, to be delivered from the second half of 2009 to 2011.

Strong order book of >S$250m, with potential for more contract wins. With these latest contract wins, we estimate that Midas has secured our projected revenue for the rest of 2009 and more than 80% for 2010. Meanwhile, the Group is still bidding for more high-speed train and metro train projects, which should further boost its order books and increase earnings visibility to 2011 and beyond.

Associate Nanjing Puzhen (NPRT) also has huge order book and good prospects. NPRT has a backlog of over 750 train cars to be delivered, worth c. RMB4.5bn, and with its production capacity on track to be enhanced to 500 train cars by the end of 2009, it is also in a prime position to win more metro train projects.

Maintain BUY, target price raised to S$0.93. We raise our target price by rolling over our valuation multiple of 15x PE (unchanged) to FY10 earnings (from FY09//10) as Midas' earnings visibility has improved substantially following these contract wins. HK-listed peers, CSR Zhuzhou and China South Locomotive, are trading at over 20x earnings.

Sponsored Links