08 June 2013

MIdas - Will It Shine in Next Few Years? - Updated 13 June 2013

Background:

Incorporated on 17 November 2000 as an investment holding company, listed on 23 February 2004  on Singapore Exchange Securities Trading Limited (“SGX-ST”) and on 6 October 2010 on The Stock Exchange of Hong Kong Limited (“SEHK”), Midas Holdings Limited (the “Company” or "Midas”, together with its subsidiaries, referred to the “Group”) has grown over the years to gain  recognition as a leading manufacturer of aluminium alloy extrusion products for the rail transportation sector in the People’s Republic of China (“PRC”).

Under the Group are three business divisions, namely:
(a) the Aluminium Alloy Extruded Products Division,
(b) the PE Pipes Division, and
(c) the Aluminium Alloy Plates and Sheets Division.

These three divisions are strategically located in the PRC to take on the opportunities as well as to capitalise on the potential benefits of the vast developments that are taking place in the infrastructure and rail transport sectors. Besides our core business, we have a 32.5% stake in a licensed metro train manufacturing company in the PRC, Nanjing SR Puzhen Rail Transport Co., Ltd. (“NPRT”).

Source: Midas FY2012 Annual Report 

In recent months, Midas announced a few projects grabbed from various countries. YTD project value is about RMB 2.5 Billion or about S$ 500 Million which could last until FY2014. As it largely depends on the development in China, so as urbanization in progress in China, we foresee more cities require a better and faster train service there.

- Updated 13 June 2013: Midas announced another project obtained by the respective party, on building metro trains in China, and YTD project value is about RMB 3.6 Billion or about S$ 700 Million which could last until FY2016. 

I learnt from news that China was in the midst of changing new government last year, and so the rules and regulation was in review. Started from this year onward, we see a new regulation body to control the new projects of rail tracks. I believe it can improve the efficiency in planning and running the execution of the development of rail tracks in mainland, especially for those 2-3 tier cities.

However, as the income stream is quite volatile, you have to be prepared to experience the share price volatility in coming years, until the development in China is in mature stage. Also you have to be more closely monitoring the fiscal policy in China. I believe China is now trying to push for the growth in domestic demand industry, hence the improvement in infrastructure in Mainland definitely will help cater to this requirement.

Below is the snapshot of Financial Highlight captured from Midas IR website:





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