Midas

Midas: FY13 results came in largely in line as net profit surged 71.3% to Rmb47.7m on a 32% rise in revenue to Rmb1.1b. Top-line was led by the group’s Aluminium Alloy Extruded Products Division which saw revenue rising 32.4% to Rmb1.0b, due to an increase in business volumes, buoyed largely by the Transport industry. Overall gross margins dipped slightly to 24.5% from 28.9% due to a change in product mix, which included sales of aluminium alloy extrusion profiles for freight wagons, that typically command lower processing fees. Notably, bottom-line was aided by a turnaround from its associate company, Nanjing Puzhen Rail Transport (NPRT), which saw positive contributions at Rmb13.6m vs losses of Rmb5.7m in the previous year, due mainly to higher train cars deliveries made by NPRT during the year. Going forward, Midas notes that the outlook for the PRC rail transportation industry is expected to remain vibrant over the mid to long-term, adding that the PRC’s government’s continued support to grow China’s transportation network will see the China Railway Corporation (CRC) making ~Rmb630.0b in railway fixed-asset investment in 2014. Maybank-KE believes that the worst may be over for Midas as the strong order win momentum seen in FY13 (Rmb812.5m worth of orders), especially from the high-speed rail sector, should spark an earnings rebound from FY14 onwards, with the house forecasting a three-year EPS CAGR of 73.0%. Midas currently trade at 0.9x P/B, and the group has declared a first and final dividend of 0.25¢ per share (same as FY12). Latest broker ratings as follows: Maybank-KE maintains Buy with TP $0.75 CIMB maintains Add with TP $0.71 OCBC maintains Buy with TP $0.67