Midas Holdings (Midas) has guided that it expects to report an unaudited net loss for its upcoming 3Q12 results. This is below our expectations although we had previously highlighted that Midas’ financial results would remain weak over the next 2-3 quarters. Reasons attributable for the expected net loss were lower revenue, higher operating expenses and finance cost and a share of loss from its associated company NPRT. Nevertheless, China’s railway fixed asset investments rebounded strongly in Oct, while high-speed train car orders could be re-ignited by China’s Ministry of Railways soon. We believe that investors should focus on the likelihood of a recovery in Midas’ business operations in FY13. We pare our FY12 and FY13 forecasts but maintain our BUY rating. Our fair value estimate is lowered marginally from S$0.51 to S$0.505, still pegged to 1x FY13F P/B.
Issues third consecutive negative profit guidance
Midas Holdings (Midas) has issued a negative profit guidance, expecting an unaudited net loss for its upcoming 3Q12 results. This is below our expectations although we had previously highlighted that Midas’ financial results would remain weak over the next 2-3 quarters. Reasons attributable for the expected net loss were lower revenue, higher operating expenses and finance cost and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). However, Midas still expects to remain profitable for its 9M12 results (1H12 PATMI: CNY16.9m). Similar issues had been plaguing Midas’ financial performance over the past several quarters, underscored by a slowdown in China’s rail transport sector, which we believe is temporary. Its 3Q12 results is slated for release on 14 Nov after trading hours, while an analyst conference call with management has been scheduled on 15 Nov.
Rosier industry outlook
China’s total railway fixed asset investments (FAI) for Oct surged 141.4% YoY to CNY81.0b, according to statistics released by China’s Ministry of Railways (MOR). This is the largest monthly amount thus far in 2012. On a cumulative basis, while total railway FAI from Jan-Oct 2012 still declined 0.9% YoY to CNY425.2b, it represented a sharp improvement from the 13.0% dip suffered from Jan-Sep 2012. Meanwhile, industry sources have also cited the possibility of the resumption of high-speed train car orders by MOR in 4Q12. This would be a huge positive for Midas, although orders would still take some time to filter down from its customers.
Near-term hiccup; maintain BUY
We cut our FY12 PATMI estimates from CNY45.4m to CNY19.0m, but we opine that FY12 would be a non-event for Midas and investors should instead focus on the likelihood of a recovery in its business operations in FY13. We also make some adjustments to our FY13 revenue and PATMI estimates (-5.0% and -7.5% respectively) as we input more conservative assumptions. Our fair value estimate inches down slightly from S$0.51 to S$0.505, still pegged to 1x FY13F P/B. Maintain BUY.
Midas Holdings (Midas) has issued a negative profit guidance, expecting an unaudited net loss for its upcoming 3Q12 results. This is below our expectations although we had previously highlighted that Midas’ financial results would remain weak over the next 2-3 quarters. Reasons attributable for the expected net loss were lower revenue, higher operating expenses and finance cost and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). However, Midas still expects to remain profitable for its 9M12 results (1H12 PATMI: CNY16.9m). Similar issues had been plaguing Midas’ financial performance over the past several quarters, underscored by a slowdown in China’s rail transport sector, which we believe is temporary. Its 3Q12 results is slated for release on 14 Nov after trading hours, while an analyst conference call with management has been scheduled on 15 Nov.
Rosier industry outlook
China’s total railway fixed asset investments (FAI) for Oct surged 141.4% YoY to CNY81.0b, according to statistics released by China’s Ministry of Railways (MOR). This is the largest monthly amount thus far in 2012. On a cumulative basis, while total railway FAI from Jan-Oct 2012 still declined 0.9% YoY to CNY425.2b, it represented a sharp improvement from the 13.0% dip suffered from Jan-Sep 2012. Meanwhile, industry sources have also cited the possibility of the resumption of high-speed train car orders by MOR in 4Q12. This would be a huge positive for Midas, although orders would still take some time to filter down from its customers.
Near-term hiccup; maintain BUY
We cut our FY12 PATMI estimates from CNY45.4m to CNY19.0m, but we opine that FY12 would be a non-event for Midas and investors should instead focus on the likelihood of a recovery in its business operations in FY13. We also make some adjustments to our FY13 revenue and PATMI estimates (-5.0% and -7.5% respectively) as we input more conservative assumptions. Our fair value estimate inches down slightly from S$0.51 to S$0.505, still pegged to 1x FY13F P/B. Maintain BUY.
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