Midas Holdings Ltd - On the right track

As a dominant supplier of large-section aluminium extrusion products to the rail and power industries, Midas is expected to benefit from Rmb2tr of rail infrastructure spending and Rmb500bn of metropolitan rail spending by China's top cities. Midas's 32.5% stake in metropolitan rolling stock manufacturer, NPRT, gives it direct exposure to a slew of contracts awarded by China's Ministry of Railways and Tier-1 Chinese cities. It is also the sole certified China-based supplier to global top-3 players. We like Midas's business model and the fact that it is in the right place at the right time, to harness China's increased rail infrastructure spending. Valuations are attractive relative to peers. Our target price of S$0.70 is based on DCF valuation (WACC of 11.2%). Initiate with Outperform.

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