Midas - Largest order to date firms up revenue visibility

Midas has secured two contracts worth RMB603m to supply aluminum alloy extrusion profile for 100 inter-city high-speed train sets (1,600 train cars) to subsidiaries of the China Northern Railway Group (CNR Group). This will comprise of a 50 train set RMB306m contract from CNR Changchun and a 50 train set RMB297m contract from CNR Tangshan.

The train cars involved will be part of the “CRH3-380” project which has speeds of up to 350km/h. We believe these cars will be used for the Beijing-Shanghai High-Speed train line. Thisamounts to a high profile and prestigious project and is also Midas’s single largest project to date.

We estimate these contracts, which will be delivered from 2H2009 to 2011 will involve about 18,000 tonnes of Assuming an even delivery schedule, these contracts alone will utilize about25% of Midas’s enlarged 30,000 tonnes per annum production capacity during this period. It also forms 30% and 28% of our revenue estimates for FY10 and FY11 respectively.

While initially produced on its existing lines, this project will involve the upcoming third production line once it comes onstream in 1Q2010. A minor portion of the contracts will also be for downstream fabrication work on the profiles, which we believe will eventually aid Midas’s foray into this area.

As highlighted earlier in our 9 June report “The Fantastic 4th?”, we believe that new contract announcements are likely as the third production line comes onstream. The PRC government’s RMB 4 trillion stimulus package will continue to benefit the rail infrastructure sector and we believe there will be more contract wins for Midas as we approach 2010.

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