Midas

Midas: (Despite weak set of results, possible positive sentiment as Grp’s JV Co. NPRT continues its recent orderwin momentum) As expected, grp announced a poor set of 2Q12 results in-line withs its profit guidance. Rev at Rm219.8m, -30% yoy and -4.6% qoq, while net profit at RMB1.6m, -97.5% yoy and -91.1% qoq. Gross margins at 32.3% vs 35% yoy. Drop in grp’s rev largely due to lower contributions from its core Aluminium Alloy Extruded Products Division which decreased 30.7. A sharp rise in Finance costs, +313% to RMB19.9m also weighed on grp’s bottom line due to an increase in bank borrowings and lesser interest on bank borrowings being capitalised. Grp was also hit by losses from its associated co Nanjing SR Puzhen Rail Transport (NPRT) largely due to fewer train cars delivered to its customers during the period under review. Going forward, grp cautiously optimistic on the outlook of China’s railway industry over the mid to long-term, noting that The PRC railway sector is expected to benefit from the Ministry of Railway’s recently announced 16% boost in railway infrastructure investment to about RMB470b for 2012, lifting the total planned fixed asset investments to approximately RMB580bfor the yr. Separately, grp announced that its JV Co. (32.5% stake) has won 2 large METRO contracts worth approx. Rmb1.4b, bringing Ytd order wins to Rmb2.8b. With Midas trading at historical low valuations, we do not rule out possibility of recent strong order momentum to signal a positive rerating upwards on Co’s. Ratings as follow: CIMB maintains Outperform with $0.41 TP