Midas Holdings’ (Midas) FY11 results were within our expectations. The 22.2% decline in PATMI to RMB187.4m was attributed to higher operating expenses, finance costs and further exacerbated by a sharp 81.9% plunge in contribution from its associate. A final dividend of 0.5 S cents was declared (total FY11 DPS: 1 S cent), in line with our expectations. Outstanding order book stands at ~RMB800m. While near-term weakness should still persist, there are increasing signs that China’s Ministry of Railways could resume the tendering of high-speed rail contracts and vehicle procurements again soon. Hence we ascribe a higher target peg of 11x (previously 9x) to Midas’ FY12F EPS, in line with the average forward PER of its industry peers. This raises our fair value estimate from S$0.31 to S$0.39. Maintain HOLD.
FY11 earnings within expectations
Midas Holdings (Midas) reported its FY11 results with revenue increasing 4.9% to RMB1,080.7m and PATMI dipping 22.2% to RMB187.4m. Top-line met 94.9% of our projections, but bottom-line was 1.4% above our estimates. The decline in earnings was attributed to higher operating expenses, finance costs and further exacerbated by a sharp 81.9% plunge in contribution from its 32.5%-owned associate Nanjing SR Puzhen Rail Transport (NPRT). Midas has an outstanding order book of ~RMB800m at end FY11, while order book for NPRT stands at ~RMB7b. A final dividend of 0.5 S cents was declared (total FY11 DPS of 1 S cent), in line with our expectations and similar to FY10’s 1 S cent dividend.
Boom days over, but growth still likely
It was reported that total railway construction spending in China hit RMB461b in 2011, or 23% short of the Ministry of Railway’s (MOR) target which was set in May 2011, before the catastrophic high-speed train crash in July. Funding for railway projects has also been a key concern for the industry, but recent fund raising activities by MOR, CSR Corp and China CNR suggest that the former could restart the tendering of high-speed rail contracts again soon. Midas would be a key beneficiary when contract wins flow down from its key customers.
Maintain HOLD
One positive from 4Q11 was that Midas’ Aluminium Alloy Division managed to secure concessionary tax rates of 15% for three years following its qualification as a high-tech enterprise in Nov 2011. We ascribe a higher target peg of 11x (previously 9x) to Midas’ FY12F EPS, in line with the average forward PER of its industry peers. This is supported by the improving market risk appetite and re-rating of China railway-related stocks due to expectations of a recovery in the sector. Our fair value estimate increases from S$0.31 to S$0.39. Notwithstanding our higher fair value, we opine that Midas’ earnings would need to pick up more quickly from its recent doldrums in order to justify its strong YTD rally. As such, we maintain HOLD.
Midas Holdings (Midas) reported its FY11 results with revenue increasing 4.9% to RMB1,080.7m and PATMI dipping 22.2% to RMB187.4m. Top-line met 94.9% of our projections, but bottom-line was 1.4% above our estimates. The decline in earnings was attributed to higher operating expenses, finance costs and further exacerbated by a sharp 81.9% plunge in contribution from its 32.5%-owned associate Nanjing SR Puzhen Rail Transport (NPRT). Midas has an outstanding order book of ~RMB800m at end FY11, while order book for NPRT stands at ~RMB7b. A final dividend of 0.5 S cents was declared (total FY11 DPS of 1 S cent), in line with our expectations and similar to FY10’s 1 S cent dividend.
Boom days over, but growth still likely
It was reported that total railway construction spending in China hit RMB461b in 2011, or 23% short of the Ministry of Railway’s (MOR) target which was set in May 2011, before the catastrophic high-speed train crash in July. Funding for railway projects has also been a key concern for the industry, but recent fund raising activities by MOR, CSR Corp and China CNR suggest that the former could restart the tendering of high-speed rail contracts again soon. Midas would be a key beneficiary when contract wins flow down from its key customers.
Maintain HOLD
One positive from 4Q11 was that Midas’ Aluminium Alloy Division managed to secure concessionary tax rates of 15% for three years following its qualification as a high-tech enterprise in Nov 2011. We ascribe a higher target peg of 11x (previously 9x) to Midas’ FY12F EPS, in line with the average forward PER of its industry peers. This is supported by the improving market risk appetite and re-rating of China railway-related stocks due to expectations of a recovery in the sector. Our fair value estimate increases from S$0.31 to S$0.39. Notwithstanding our higher fair value, we opine that Midas’ earnings would need to pick up more quickly from its recent doldrums in order to justify its strong YTD rally. As such, we maintain HOLD.
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