Midas

Midas: Reported strong FY10 results which were in-line, with FY10 Rev at 207.4m, +38.3%YoY, while Net Profit at 48.5m, +29.2%YoY. Strong performance mainly attributed to strong growth registered at the Grp’s Aluminium Alloy Division....

Rev from Alloy division rose 39.6% to $199.7m, which contributed approximately 96.3% of total rev in FY10, with the Transport Industry accounting for 80.3% of the division’s rev, while the Power Industry made up 5.4%. Gross Margins however declined to 34.1% vs 38.4%YoY due to higher raw material costs....

Grp saw higher contribution from its associated company Nanjing Puzhen Rail Transport, who increased the delivery of train cars to its customers, and profit contribution jumped from $3.3m in FY09 to $9.3m in FY10. As at FY10, Grp’s cash and equivalents amounted to $244.7m, which included additional funds received following the successful listing in HK....

Going forward, grp tips continued rapid urbanisation and growth across PRC to continue generating demand for new and upgraded railway lines and is not aware of any developments that will impact the business operations arising from the recent personnel changes in the PRC Ministry of Railway, and plans to further increase its presence in international markets....

Midas has proposed a final cash dividend of 0.5c/per share, working out to a total div payout to 1c per share for FY10. At current levels, grp trades at undemanding valuations of 15.8x FY10 P/E, vs historical average of 25x. However we note that ongoing concerns on China’s railway scandal could continue to weigh on stock in the near-term. CIMB and SCB maintains OutPerform with a $1.07 TP and $1.20 TP respectively.