Midas - Full speed ahead

Midas has this morning announced a Rmb70 mn contract to supply extrusion profiles for high-speed trains. This marks its fifth contract win in two weeks, with an aggregate of Rmb845 mn of orders, raising its current order book to S$240 mn based on our estimates and securing almost 90%/30% of FY10E/11E revenue forecasts.

With the Ministry of Railways likely accelerating further purchases of bulk quantities of high-speed trains to support China’s plans to increase this number (from 200) to 1,000 in 2010, we believe that the risks to our order book estimates for Midas lie on the upside.

Thus, with the third extrusion line already boosting capacities from 1Q10E, we are factoring in contributions from a fourth extrusion line by end-FY10E. This, coupled with more optimistic utilisation assumptions, raises our FY10/11E earnings estimates by 4-12%.

Consequently, with increased earnings visibility on the back of these new contract wins, we roll over our SOTP-based valuation to FY10E. Thus, our target price rises to S$1.05 (from S$0.80) and we reiterate OUTPERFORM.

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