Midas

Maybank-KE maintains Buy with TP of $0.50, based on 1x FY15 P/B. The house highlights that Midas’ post-results conference call highlighted the group’s continued optimism on China’s rail industry.

Although it remains unclear which party will have more control of a new, combined CNR/CSR, the house thinks that CSR probably stands a better chance. While most of Midas’s HSR orders now come from CNR, the house remains unfazed about future contracts from the HSR sector.

This is because: 1) Midas also enjoys good relations with CSR; 2) CNR should retain a big say in
the new entity; and 3) the enlarged entity should be more competitive in securing overseas orders.

Current order books are ample at Rmb850m for Midas and Rmb8.5b for associate, NPRT. Meanwhile utilisation remains healthy at 70%.

Management is under no pressure to refinance its short-term debt of Rmb1.6b, and does not
plan to tap the $340m balance of its $500m MTN programme for now.

The house believes that continuing investments by the Chinese government in the sector will eventually yield more orders for suppliers such as Midas.

Midas trades at 0.6x FY15E P/B, at a deep discount to CNR’s 3x and CSR’s 4x, and also much cheaper than its A-share competitor, Nanshan Aluminum (600219 CH), at 1x P/BV.

Midas continues to sit in Market Insight’s growth portfolio.