Midas Holdings
BUY S$0.50
STI : 3,303.02
Price Target : 12-Month S$ 0.60 (Prev S$ 0.50)
Look for more contract wins
• FY12 results were weak as expected but investors’ focus should be on Midas’ order book
• Fresh metro order wins of Rmb110m will grow order book to above Rmb500m
• Orders from metro and export segments are likely forthcoming in the coming months whilst high speed train orders are another catalyst
• Maintain BUY with S$0.60 TP (1.2x FY13 P/B)
Wins five metro contracts worth Rmb110m. Midas announced that it has won a total of five contracts (four awarded by JV Nanjing Puzhen) to supply aluminum profiles and fabrication parts to various metro projects in the PRC for delivery in 2013 and 2014.
More orders are likely forthcoming to boost a turnaround in 2H13. Looking ahead, we believe that Midas will win more orders from a number of sources, including high-speed, metro and export orders in the rail segment, as well as orders from non-rail segments. We estimate that Midas can win between Rmb300m- 400m worth of contracts per annum in each of these four segments. There are also increasing expectations from both the market and railway equipment players that high-speed rail equipment orders will be handed out within a few months, post China’s leadership transition.
Maintain BUY, TP S$0.60. Our target price for Midas of S$0.60 is based on 1.2 FY13 P/B, slightly below the mean P/B (of 1.26x) for the stock since 2010. Midas’ share price could rerate as the group wins more contracts to bolster its order book.
FY12 Results Recap
Midas reported FY12 net earnings that declined 85% y-o-y to Rmb27.8m as revenue declined 20% y-o-y to Rmb870m. This was due to lower delivery of railway-related projects during the year. Gross margin for the core aluminium alloy business fell by 4.8ppt to 29.4% as a result of lower utilisation. Contribution from associate, NPRT, was a loss of Rmb5.7m from a positive of Rmb8.3m a year ago. Finance costs climbed 91% y-o-y to Rmb74m due to loans taken out to expand capacity.
This set of results comes as no surprise as orders have been slow in coming for Midas, in particular no high speed train orders have been awarded by the MoR for about two years. From Midas’ results below, we can see that the group’s quarterly revenue has been steadily declining due to a lack of order wins, whilst gross margins have also declined as more capacity came on stream.
Receivables rose to Rmb1,008m from Rmb698m a year ago while inventories also increased to Rmb701m from Rmb478m due to slower payments and slower deliveries. However, the group noted that its major customers are large PRC SOEs and have the ability and credibility to eventually pay. We also expect this situation to improve, post the re-structuring of China’s Railway Ministry.
Where will orders for Midas come from?
Looking ahead, without any significant wins in the last six months, the next two quarters should also be fairly weak for Midas and we would need to see more orders being won at a quicker pace to see a firmer turnaround in the second half of the year for Midas.
We believe that Midas will win more orders from a number of sources, including high-speed, metro and export orders in the rail segment, as well as orders from non-rail segments. To rehash from our report in Nov 12:
Metro and light rail - According to the China Association of Metros, which is under the NDRC, China will have 40 cities with metro systems totaling over 7,000km, which is over four times the current length, by 2020. This means that over 5,000km of metro lines are to be built over the next eight years, with potential demand for over 30,000 train carriages. So far in 2012, the National Development and Reform Commission (NDRC), which is China’s top economic planning agency, has approved 25 new metro and inter-city rail projects totaling over Rmb840bn, mostly to be built over the next three to eight years.
In fact, Midas’ 32.5% owned JV Nanjing Puzhen (NPRT) has won a trove of metro contracts since Jul 2011, with nine projects worth over Rmb7.5bn to be delivered from 2013 onwards. Naturally, we can expect Midas to win a fair amount of supply orders from NPRT alone.
We estimate that Midas could win c. Rmb300m worth of metro projects in 2013, and up to Rmb400m per annum beyond that.
Exports: With international certification from the three major global train manufacturers Alstom, Siemens and Bombardier, Midas remains the only China manufacturer that has supplied aluminium alloy extrusion train profiles and fabricated parts for overseas projects. Midas’ international track record includes multiple projects in Europe, Asia and South America. Some prominent overseas projects include the recently announced high-speed 400km/h rail link between Moscow and St. Petersburg to be constructed in time for the 2018 FIFA World Cup. We estimate that Midas can win between Rmb300m-500m worth of export orders per annum.
High-speed: Since the removal of the previous Railway Minister Liu in February11, and the Wenzhou accident in July 11, the Ministry of Railway (MoR) has not placed out any orders for high-speed trains. However, there are recent signs and news that the MoR will soon resume its high-speed train purchases. This includes multiple bond issues by the MoR in 2012, raising a record Rmb164bn, as well as comments by CSR and unofficial sources within the MoR that an order of c. 400 high speed train sets (each train set is usually either eight or 16 train cars) could be put up for tender as soon as by 2012 year-end.
This translates to a potential total order of aluminium extrusion profiles of Rmb1.5bn (based on 4,000 train cars), and assuming Midas maintains its market share of 2/3, it could win c. Rmb1bn worth of high-speed train orders for delivery over the next two to three years.
The recently announced break-up and reform of the Ministry of Railway – administrative and regulatory functions to be absorbed into the Ministry of Transportation whilst a new company China Railway Corp takes over commercial operations, would be also positive for suppliers in this segment. Already, there is talk of a potential listing of assets and/or an increase in ticket prices, which would lead to stronger funding for China’s railway program.
Non-rail: The group’s efforts to diversify its order books have also started to pay off, as shown by its Rmb123.4m contract win in September to supply aluminium alloy tubings for the power industry.
Whilst Midas was previously constrained by its capacity and had its hands full dealing with railway contracts, the group’s enlarged capacity of 50,000 tonnes per annum compared to just 30,000 tonnes per annum before mid 2011, will allow it to take on more non-rail contracts, such as those from the power industry and other specialized extrusion products.
We estimate that Midas can comfortably win contracts from the non-rail segment i.e. power industry and other extrusion products of c. Rmb350m per annum.
Valuations
Our target price for Midas is pegged to 1.2x FY13 P/B, which is just below the mean P/B this stock has been trading since 2010. We see the stock’s P/B valuation improving as it wins more orders, and its earnings and ROE improve. The stock is also trading at similar forward PE valuations compared to other HK-listed railway equipment manufacturers and would need to see more substantial contract wins to rerate further.
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Midas
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GorgeousOng
Elite |
27-Mar-2013 08:10
Yells: "Hehehaha...enjoy life n live to the fullest..." |
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Sis, be positive lah!!!🙊 !
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halleluyah
Elite |
27-Mar-2013 07:55
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Dun think it can reach tt px in short term.
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student
Veteran |
27-Mar-2013 07:34
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.57 is better price for dumping.
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cheongsl
Master |
27-Mar-2013 07:20
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Looks like railway industries will be even more messy. In short terms, the focus should be still on the dept repayment and how to increase revenue. As for 2015 target, I believe the corporate will try to slash the cost involve. The time currently will be too short for them to meet the target. The need to sale their asset to repay dept, bank loan will be difficult and cash flow problem might need at least one year to resolve. Thus what I believe they will just build the railway line, thus they have complete the target 120km target, but the amenities and E& M they not to handle, and sell the asset to other company, thus train purchase, fare gate, speaker, communication, signalling, etc. will be transfer to the purchase company, this will significantly reduce the building cost and building time. Thus the purchase company, will decide base on the demand and requirement to increase the amenities and E& M facilities. Currently there is still no concreate plan for the reforms. Thus in short terms there should not be major tendering. The railway fare increase, face the challenge from road transport, sea transport and air transport. Thus whether the demand for the railway transportation will decrease significantly after the fare increase is still unknow. And currently only know that 盛 光 祖 is pushing for fare increase. 发 改 委 专 家 建 议 铁 总 出 售 资 产 还 债 大 干 线 可 上 市 “铁 路 债 务 很 现 实 的 一 个 处 置 方 式 就 是 出 售 现 有 资 产 ， 大 干 线 不 适 合 整 体 出 售 ， 那 也 可 以 通 过 上 市 来 出 售 ， 支 线 怎 么 处 置 都 可 以 。 ”他 说 ， 原 则 上 说 ， 铁 路 的 资 产 都 可 以 卖 ， 只 是 卖 的 形 式 不 一 样 。 今 年 的 铁 路 基 本 建 设 投 资 计 划 达 到 5300亿 ， 根 据 铁 路 的 十 二 五 规 划 ， 中 国 2015年 要 建 成 12万 公 里 的 线 路 。 而 当 下 铁 道 部 一 分 为 三 ， 铁 路 的 投 资 和 建 设 会 不 会 受 影 响 ？ 中 国 铁 路 总 公 司 代 替 铁 道 部 承 担 投 资 功 能 后 ， 既 有 的 发 展 模 式 也 面 临 改 变 。 过 去 是 部 省 合 作 ， 以 部 为 主 ， 高 额 负 债 来 推 动 发 展 ， 现 在 需 要 回 到 十 二 五 的 中 长 期 规 划 中 来 。 过 去 的 部 省 合 作 ， 实 际 上 摆 脱 了 铁 路 的 中 长 期 规 划 ， 这 不 妥 当 。 而 现 在 需 要 从 部 省 合 作 会 议 纪 要 的 发 展 基 础 回 归 到 中 长 期 规 划 的 发 展 基 础 上 去 。 所 以 ， 铁 路 建 设 的 节 奏 、 投 资 的 标 准 都 将 面 临 调 整 。 铁 路 的 投 资 会 量 入 为 出 ， 因 为 过 去 高 负 债 的 发 展 模 式 无 论 如 何 都 难 以 为 继 ， 而 新 的 融 资 方 式 还 情 况 不 明 。 今 年 基 本 建 设 投 资 5300亿 的 计 划 估 计 还 能 完 成 ， 毕 竟 其 中 很 多 还 是 在 建 项 目 ， 保 在 建 的 整 体 定 调 ， 这 部 分 项 目 预 计 问 题 不 大 ， 但 今 后 的 新 建 项 目 怎 么 搞 ？ 尤 其 是 新 建 项 目 的 投 融 资 模 式 这 一 两 年 就 会 发 生 变 化 ， 这 部 分 前 景 不 明 。 部 省 合 作 的 模 式 还 会 延 续 ， 但 是 内 容 会 有 很 大 的 变 化 。 政 企 分 开 后 ， 过 去 作 为 铁 路 投 资 首 要 推 力 的 银 行 贷 款 将 谨 慎 得 多 ， 这 也 直 接 导 致 高 负 债 的 发 展 模 式 将 面 临 基 础 不 牢 的 问 题 。 这 样 的 情 形 中 ， 社 会 资 本 有 可 能 活 跃 ， 新 项 目 里 面 ， 地 方 政 府 对 于 社 会 资 本 的 进 入 积 极 性 会 比 较 高 ， 原 来 国 铁 对 社 会 资 本 的 介 入 其 实 积 极 性 较 低 。 当 然 社 会 资 本 能 否 顺 利 引 入 ， 还 要 看 铁 路 进 一 步 的 改 革 动 作 。 铁 路 运 价 可 能 还 会 继 续 上 涨 ， 铁 道 部 内 部 价 格 上 涨 的 冲 动 极 大 。 但 事 实 上 ， 铁 路 运 价 的 上 涨 只 是 短 期 行 为 ， 对 谁 都 不 利 ， 运 价 上 涨 越 多 ， 铁 路 的 竞 争 力 会 越 差 。 很 多 人 拿 铁 路 的 运 价 与 公 路 比 ， 这 没 有 意 义 。 如 果 铁 路 的 综 合 运 价 成 本 和 公 路 都 差 不 多 了 ， 铁 路 就 只 有 死 路 一 条 。 铁 路 服 务 的 灵 活 性 和 公 路 没 法 比 ， 铁 路 和 公 路 保 持 一 个 较 大 的 运 价 差 ， 其 实 是 合 理 的 。 铁 路 企 业 资 本 运 作 和 上 市 的 步 骤 有 可 能 会 加 快 。 这 方 面 国 内 的 研 究 其 实 不 少 ， 包 括 哪 些 资 产 适 宜 拿 出 来 都 做 了 很 长 时 间 的 筹 划 。 铁 路 资 产 流 动 可 能 因 为 改 革 的 启 动 而 加 快 ， 这 和 社 会 资 本 的 进 入 也 是 相 关 的 ， 铁 路 债 务 很 现 实 的 一 个 处 置 方 式 就 是 出 售 现 有 资 产 ， 资 金 也 就 抽 回 来 了 ， 这 也 不 影 响 铁 路 的 大 局 ， 负 债 的 情 况 却 能 很 快 改 善 。 政 府 的 监 管 方 式 也 迫 切 需 要 改 变 。 要 对 过 轨 、 清 算 、 关 联 交 易 、 铁 路 企 业 之 间 的 相 互 交 易 制 定 行 业 规 则 ， 目 前 这 块 还 完 全 没 有 改 ， 还 拢 在 铁 路 总 公 司 里 面 。 这 个 如 果 不 改 ， 总 公 司 就 会 固 守 成 为 一 个 超 级 大 的 垄 断 企 业 。 行 业 规 则 的 制 定 ， 必 须 由 政 府 监 管 机 构 来 介 入 ， 才 能 形 成 ， 这 些 规 则 如 果 是 任 由 其 在 总 公 司 体 系 内 部 来 形 成 的 话 ， 那 将 是 一 个 巨 大 的 问 题 。 另 外 ， 公 益 性 运 输 的 问 题 暂 时 还 没 有 明 晰 ， 这 里 面 涵 盖 学 生 、 军 人 、 残 疾 人 等 运 输 ， 也 包 括 青 藏 铁 路 和 西 部 的 一 些 线 路 。 公 益 性 运 输 涉 及 政 府 补 贴 ， 但 哪 些 线 路 需 要 补 、 哪 些 运 营 需 要 补 都 还 不 清 晰 。 线 路 的 补 贴 涉 及 到 新 投 资 模 式 的 问 题 ， 运 营 补 贴 涉 及 到 以 后 运 营 亏 损 的 问 题 ， 在 中 国 铁 路 总 公 司 这 一 设 置 下 ， 这 些 问 题 都 先 混 着 了 ， 暂 时 还 是 延 续 过 去 的 大 锅 饭 的 模 式 ， 一 改 就 灵 是 不 可 能 也 不 现 实 的 。 最 后 ， 铁 路 改 革 启 动 后 ， 国 铁 会 不 会 马 上 改 变 铁 老 大 的 既 有 作 风 ， 我 对 这 块 不 抱 太 高 希 望 。 因 为 目 前 的 改 革 是 一 个 不 彻 底 的 改 革 ， 这 直 接 决 定 了 企 业 的 转 变 是 一 个 缓 慢 的 过 程 。 铁 路 人 员 的 转 变 分 为 两 类 ， 第 一 类 是 一 线 职 工 ， 这 部 分 人 问 题 不 大 ， 而 迫 切 需 要 转 变 思 维 的 是 铁 路 中 高 层 管 理 人 员 。 铁 路 的 干 部 要 从 政 企 合 一 下 的 体 制 内 思 维 ， 转 变 为 经 营 型 人 才 ， 不 容 易 。 “除 了 广 州 铁 路 (集 团 )公 司 、 青 藏 公 司 不 用 变 ， 其 他 16个 地 方 铁 路 局 肯 定 也 得 换 牌 ， 但 是 换 牌 时 间 还 没 有 确 定 。 ”消 息 人 士 告 诉 记 者 ， 成 立 中 国 铁 路 总 公 司 后 ， 作 为 下 属 企 业 的 地 方 铁 路 局 也 面 临 公 司 化 改 革 ， 目 前 运 行 机 制 不 变 。 他 表 示 ， 原 来 有 一 个 设 计 方 案 是 ， 改 革 后 18个 铁 路 局 (公 司 )将 组 建 七 大 区 域 公 司 ， 目 前 来 看 ， 这 个 方 案 搁 浅 了 ， “因 为 在 目 前 的 形 势 下 ， 进 行 这 样 的 改 革 不 利 于 铁 路 的 安 全 、 稳 定 和 管 理 。 ” 中 国 铁 路 总 公 司 负 责 人 盛 光 祖 多 次 在 年 度 铁 路 工 作 会 议 上 指 出 ， 要 转 换 铁 路 经 营 机 制 ， 扩 大 运 输 企 业 经 营 自 主 权 ， 落 实 运 输 企 业 市 场 主 体 地 位 ， 并 且 地 方 铁 路 局 最 终 将 进 行 公 司 化 运 营 。 盛 光 祖 接 受 记 者 采 访 时 表 示 ， 目 前 各 个 铁 路 局 就 是 企 业 ， 如 果 进 行 公 司 化 的 机 制 转 变 ， 也 就 是 让 它 们 在 经 济 发 展 过 程 中 更 适 应 市 场 经 济 特 点 。 但 据 记 者 了 解 ， 地 方 铁 路 局 什 么 时 候 公 司 化 目 前 仍 无 时 间 表 。 |
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Bopanha
Master |
26-Mar-2013 15:28
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Orrh, many people dumped around the price 52 or 52.5 cents.
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wesely2k
Veteran |
26-Mar-2013 14:08
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i dump at 0.525 today , good luck! | ||||
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Bopanha
Master |
26-Mar-2013 13:52
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Serious. I am targeting Midas from 60 cents to 75 cents too!! Cheers.
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Bopanha
Master |
26-Mar-2013 13:47
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As I revised the outlook of Midas, I feel I really need to upgrade and advance my target price. I look at the figures and say, hey the book value is 50 cents (basing on 75 cents as the P/B of 1.5x). Now Midas continues to receive orders earning them credence in international markets beside the Chinese markets. Now within less than 14 days, they were again awarded 5 metro contracts in China, and then a contract in Russia, all added up to approx SGD $65 million. With more trustworthiness being built up by Midas in eyes of authorities, and inflow of good orders, I really have to appraise Midas upwards, don't you think so? Hahaha!! | ||||
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Peter_Pan
Supreme |
26-Mar-2013 12:59
Yells: "did you order dunkin' donuts" |
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The fight continues....will UOBKH let its clients down? Or will OCBCS & DBSV & DMG let their clients down?
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cheongsl
Master |
26-Mar-2013 07:33
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Yup this is an old news, initially during the reform I was thinking of the builiding and tendering will be transfer to transport ministry, then there might be chances of HSR train tender to continue, but when the news get clear it go to the new listed Rail corporation. And currently the rail corporation " 法 定 代 表 人 " is the previous railway minister, and I don't think he will slap his own face in short terms, thus within 1~2years time HSR train tendering is unlikely, unless there is a change in the leader of the rail corporation. Currently, 盛 光 祖 is pushing for the fair price to increase, but this need to get approval from the transport ministry. I believe there is some true for rumous that the railway ministry still own alot of money, base on the corporate just form and need to push for fair increase. The billion intension of building comes from the government, but the building will be done by the corporate, which is a mismatch in roles, thus likely the billion intension will also dissolve soon, unless the government come out with the money for the corporate. That is my believe.
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cheongsl
Master |
26-Mar-2013 07:11
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Thanks, at least I get some feedback of my views. D/E is consider within tolerance, but currently the main asset is the property, plant and equipment, which they used for the loan. The plant and equipment will depreciate, and property price if there is a major correction, this will trigger bank to force the repayment. But likely chances of happening is limited in China base on current situation, but I don't think they can repay the loan in short terms, thus the risk of property price go downs still stands. Midas is dual list in 6 October 2010 in HK with additional 253,000,000 share issue, which is around 1/5 of current total share.
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dakota037
Member |
26-Mar-2013 02:42
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Chill guys. It is really good to see both sides of the coin, one from analyst reports which supports the potential of Midas while Cheongsl here pointing out some contentious issues of their analysis. NGBC6666, I know that you are vested and would want to hear the good news and not the " bad" . But it would be good for you to do your own homework and read other analyses as well to prep if something goes wrong. Everyone's objective here is to inform the uninformed. And hopefully not to mislead the uninformed. For Cheongsl, pls continue to argue on your side of points. Point out more critical issues that Midas might be facing in the future. Or if you think that the outlook is better, do point that out too. Their debt structure does not look critical at this juncture, D/E ratio is still low, they should be able to borrow more if they need to pay off outstanding debts. Adding on, more debt financing is good, it adds value to the firm because of the interest tax shield it gives to the cash flows of the firm. But did Midas dilute their shares in the past? If they did then it might be an option to them if they feels that the price is overvalued. Cheers
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shareflux
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25-Mar-2013 23:57
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Midas up 1.5cts today. Shortists will be wondering why despite all the bad news hahaha... Some one is right and only Mr Market will know why. | ||||
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lzt197208
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25-Mar-2013 23:14
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这 个 已 经 是 3月 6号 的 旧 闻 了 ， 现 在 已 经 没 有 了 铁 道 部 长 。 | ||||
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cheongsl
Master |
25-Mar-2013 22:50
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Hi NGBC6666, If you carefully read all my post, you will know that I don't short, as shorting is a relatively risky act, especially when all the BB are trying to push up the price to clear off their stock. As there is unlimited upward risk. But for this counter, I was attract to it by the popularity of recommendation from different institute, but after taking closer look at the counter. I discover that this counter really was not attractive at all. I just issue warning. Actually, I don't have to. But I was once badly burn for trusting the research report. Thus, I hope that those vest will be trading and not long term investor and mislead by the report. As currently all data I evaluate show that it profit margin are declining, there is no address of bottomline continuously increasing, if the order does not come in fast enough, or did not get enough order, then this will become penny stock, as factory, equipment will depreciated, but borrowing, financial cost will eat up all their profit. And currently all report are just basing on the market for railway transport will be having billion of investment coming in and HSR will be award soon. But the report of HSR train tender, actually there is already news reporting that it will not be activated until the passenger volume increase. This is in news in early march. " 市 場 一 直 憧 憬 ， 內 地 兩 會 後 將 會 重 啟 高 鐵 動 車 組 招 標 。 不 過 根 據 《 新 京 報 》 表 示 ， 全 國 人 大 代 表 、 鐵 道 部 部 長 盛 光 祖 否 認 有 關 重 啟 招 標 的 傳 聞 。 盛 光 祖 表 示 ， 未 招 標 並 無 特 殊 原 因 ， 是 因 為 此 前 的 招 標 工 作 基 本 完 成 ， 現 在 是 廠 家 抓 緊 生 產 階 段 ， 且 現 階 段 動 車 組 是 夠 用 的 ， 不 需 要 再 進 行 招 標 。 他 表 示 ， 隨 著 客 運 量 再 增 長 ， 可 能 還 需 要 增 加 動 車 ， 那 時 候 可 能 會 啟 動 招 標 。 " I will stop my warning, since most people in this counter are overwhelm with greed, and there is no point in releasing all this warning.
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NGBC6666
Member |
25-Mar-2013 21:38
Yells: "In in, out out, up up, down down: this is STOCKS!" |
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Dear Cheongsl, You have been talking down Midsa rather mercilessly of late in this thread, presenting tons of data and analysis along the way. It is very obvious that you have spent a lot of time and effort doing the research and writing your views here. I remember you said that you are not shorting Midas. To me, it is unbelievable that your are not shorting it! I am very curious about your objective of spending so much energy, resources and time talking down Midas. I am a mediocre person of normal IQ and I have been scratching my head, trying to figure your objective, but my effort is futile. Hence, I would like to beg you to share with me your objective, please. Thank you in advance for your enlightenment. P/S: After reading this post, it is not difficult for you to deduce that I am vested in Midas, right? Yes, I am vested, TP $0.60. And you are not shorting???? I am really puzzled... ...
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Lifeisgreat
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25-Mar-2013 21:17
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For those who would like to have a more objective view about Midas' current and future business outlook, pls refer to the report from DBSV: Midas Holdings : Look for more contract wins (DBSV) |
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cheongsl
Master |
25-Mar-2013 20:17
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This report is release 22nd march 2013, which is last friday. I notice that the new loan is slightly less then the CIMB report which is only 200m USD, which is equal to 1242m RMB, additional loan, but you look at the forcast for the dept over equity which is reduce from 25.8% to 16.8%, that means that RHB expect the MIDAS to reduce borrowing in 2013, but in the report it mention 1242m additional borrowing, this is really a contradicting figures. Don't forget MIDAS previous borrowing from bank is 1472m, if dept to equity is expect to reduce to 16.8%. Then the borrowing should be around 962m, thus Midas will need repay 1752m to borrowing in order to achieve this but current order book is only around 700m, where does this amount come from, are they going to issue new share to dilute the shares to have this amount? If not the dept to equity should be expected to further increase to around 45% if the borrowing is 200mUSD.
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Lifeisgreat
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25-Mar-2013 18:11
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是 听 见 气 鸣 声 了 ， 但 不 知 会 抛 锚 吗 ？ 
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GorgeousOng
Elite |
25-Mar-2013 16:50
Yells: "Hehehaha...enjoy life n live to the fullest..." |
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我 们 的 火 车 是 不 是 要 开 了 ？ ？
Is our train going to move soon?? |
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