Midas

Midas: NRA capital met up with mgt and note that: 1) the bulk of the Q1-2013 loss came from its associate Nanjing SR Puzhen Rail Transport Co - similar to its loss in Q1-2012 and was due primarily to fewer trains being delivered. 2) Midas has a healthy order book of more than RMB8b of which RMB1.5b is its own and another RMB7b from its associate Nanjing SR Puzhen Rail Transport Co. In 2013 alone, Midas has secured about RMB400m in new orders while its associate has secured contracts of about RMB1b. 3) A typical contract for Midas and its associates lasts about 24 months - so we can expect better revenue and profit in the coming quarters. 4) Current utilisation is around 40% which gives Midas the much needed capacity to accept and deliver new high speed train orders as and when they are tendered out. 5) Midas continues to wait for the release of high speed train orders which are long overdue and behind schedule. The delay is linked to the formation of the new Ministry of Transport and also that new China President Xi Jinping is more concerned with tackling corruption which may in the short term slowdown its pump priming activities. House conclusion is that there is no change in the reasons and rationale for recommending Midas which remains undervalued. The 1Q13 results although reflecting a loss does not detract from its growing and more healthy order book which should start to kick-in in 2H13.