Midas Holdings - Golden years ahead

Leader in extrusion profiles for passenger train cars. Midas has a strong track record and is a leader in supplying aluminium alloy extrusion profiles to China’s railway industry, which is slated for firm growth for many years. Currently installing its third production line, which will raise capacity by 50% to 30,000 tonnes per annum, Midas is well positioned for growth.

High profile contract wins boost confidence. On June 16 and 22, Midas announced it won 4 contracts totaling RMB775m to supply aluminium profiles for various high-speed train projects in China. This not only boost Midas’ order-book to over S$250m and highlights its ability to win contracts, but also underlines its market leader position in this segment.

Associate Nanjing Puzhen also poised to do well. With an order book of over RMB4.5bn and an enlarged capacity of 500 train cars by 2010 to bid for even more contracts, NPRT is in a good position for growth and to contribute to Midas’ bottom line.

BUY, TP S$0.93. Our target price of S$0.93 is pegged to 15x FY10 PER, still at a discount to larger HK-listed peers. Midas can re-rate further if it can continue to win more contracts and deliver on earnings.

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