Maintain BUY. Assuming the Ministry of Railways issues a new round 

of high-speed train tenders early next year, we   expect Midas may be 

able to record   earnings recovery in 2H13 or 1H14, give and take six

months   for   delivery. In our view,   Midas’s   current share price will be 

supported by 0.8x FY13F P/BV. Maintain BUY and TP of SGD0.48.

Boon for Midas if CNR wins potential tenders. CSR and CNR are 

Midas’s two major customers. But they differ in that orders from CSR 

are more on MRT projects while orders from CNR pertain to high-speed 

rail system.   In our view, it will be a boon for Midas if CNR   is able to 

clinch more of the anticipated high-speed train tenders. In fact, this is 

very   possible.   For one, CNR provided all the trains running on the 

newly-launched Harbin-Dalian high-speed railway, the world’s first highspeed railway in areas with extremely low temperature. This is clearly a 

feather in its cap and underscores the improvement of its technological

ability. In addition, given the extremely weak order flow in the past two 

years, CNR’s orderbook would have been depleted and it should have 

enough spare capacity to take new orders.

Why new round of train tender offers is a high probability. In the 

past two years, the building of new high-speed trains has lagged the 

construction of rail lines.   Since 2004, the Ministry of Railways has 

purchased around 1,300 train sets.   At the   peak   in 2009, it ordered

around 770 train sets. Thereafter the tender process   became almost 

frozen with only double-digit   purchase orders in both   2010 and 2011. 

With the Harbin-Dalian high-speed railway starting operation this month

and more lines coming on-stream next year, we do not think the current 

number of trains is enough to meet demand. Granted, we do not have a 

ballpark figure of how many trains will be needed in the next few years.

But based on the current train density of about 0.7 trains per km, it is 

not too far-fetched to say that demand will be substantial.

Recovery still at early stage. Following a meeting with management

recently, we believe that Midas is on track for recovery in the medium 

term once it overcomes the lingering difficulties that will persist in the 

next few quarters. Potential contract wins   from upstream customers 

such as CSR and CNR, China’s two   largest train makers,   will   help 

restore the company’s profit back to   a more normal level.   Midas   has 

also been working hard to diversify its revenue base, including moving 

up the value chain into   the   fabrication business, strengthening its 

foothold in the power industry and venturing further overseas. Though

such diversification and building of new factories will eat into margins in 

the short term, they will ensure Midas’s sustainability in the long term.

More years to go for   China’s high-speed rail. As far as we know,

there are no major changes to China’s original plan to build 16,000km 

of   high-speed rail   lines   by 2020. The   fatal railway   accident and 

corruption scandal in 2011 put a spanner in the works and only about 

half of the targeted length has been completed so far. This means a 

reacceleration of construction is possible in the next few years.

Upstream customers’ order wins a key catalyst. CSR and CNR are 

Midas’s two major customers. In the past two years, the building of new 

high-speed trains has lagged the construction of rail lines.   With   the 

Harbin-Dalian   high-speed railway starting operation   this month and 

more lines   coming on-stream next year, we   do not think the   current

number of   trains   is enough to meet demand. Should the Ministry of 

Railways resume the tender process for high-speed trains next year, we 

believe Midas will be a major beneficiary given its long-term   track 

record and good reputation.

Expect earnings recovery   from 2H13. Assuming   the   Ministry of 

Railways issues a   new round of high-speed train tenders early next 

year, we   expect Midas may be able to record earnings recovery in 

2H13 or 1H14, give and take   six months   for   delivery. In our view, 

Midas’s   current share price will be supported by   0.8x FY13F P/BV.

Maintain BUY and TP of SGD0.48.