Midas Holdings

DBS Group Research, Dec 10

MIDAS won its first HSR contract (168 million yuan, S$34.6 million) in more than two years in October, as China resumed its high-speed railway (HSR) development programme, with more likely to come.

We believe the group could win a substantial order arising from the recent second rolling stock tender for 314 train sets, or about 2,500 train carriages.

Over the next two years, we believe more than 700 train sets could be further tendered for, resulting in further wins for Midas in the HSR segment.

At the same time, we expect (China) metro orders to continue flowing in and overseas orders, which have grown substantially in 2013, to continue to be robust as Midas looks to maintain a more diversified earnings base.

Hence, we project Midas's earnings to improve from RMB 61 million in FY13 to RMB 209 million in FY14, on higher revenue as well as better margins.

With 2013 at its end, and having introduced FY15F estimates, we roll over our valuation multiple for the stock to 1.2 times FY14F P/BV to derive a new TP of S$0.64.

Trading at just one time FY13 P/BV, we believe current valuations are attractive for a stock whose earnings are poised for a strong rebound into FY14F and FY15F.

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