Market Pulse: Midas Holdings (30 Mar 2009)

By Carey Wong
Mon, 30 Mar 2009, 09:03:11 SGT

Market Pulse: Midas Holdings (30 Mar 2009)

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Midas Holdings Ltd: Forming a pedestal for growth

Summary: We visited Midas Holdings (Midas) and its 32.5% owned associate, Nanjing Puzhen Railway Transport (NPRT) in China. Our confidence is invoked seeing the current progress of its expansion plans from various business fronts. While there could be the possibility of more competitors a few years out due to the need to cater to the sheer magnitude of aluminium profiles needed, we think that Midas is in good stead to hold the market leader position with its established quality track record and expansion plans. In summary, Midas will use 2009 to improve current operations while expanding its 3rd line and NPRT will be the key deliverer of earnings growth with expected deliveries of 30-35% of its 768 train car order. Margins should be held steady in 2010 when complementary downstream processes start to contribute more substantially. We maintain our BUY call with fair value of S$0.63 based on 14x FY09F PER. In the mean time, Midas is likely to trade in tandem with sentiments of S-chips and share price catalysts could come from contract wins. (Kelly Chia)

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NEWS HEADLINES

- Major rig builders may have gone without a single significant newbuild order for the second consecutive quarter, suggesting that an industry lull has set in.

- SGX remains keen to attract Chinese listings, despite the massive blow dealt to the reputation of S-chips by a slew of accounting scandals and corporate governance failures.

- China Essence CEO stepped in to shore up the market confidence by allaying loan fears and raising his stake in the group.

- Singapore Food Industries has been granted approval for delisting and extension of time to hold its Annual General Meeting.

- Total Access Communication PCL said that it would curb capital spending in 2009 due to the economic downturn and while it waits for a 3G licence.

- Noble Group said it will start trading physical fuel oil globally, amid expectations to gain from tightening residual fuel supply.

- Olam International Ltd exchanged US$21.2m of its 1% convertible bonds for new securities, helping reduce the company's borrowings.

- General Contractor Low Keng Huat saw its FY09 revenue and net profit more than double to S$274.6m and S29.4m, respectively.

- The MOH is set to further liberalize the use of Medisave to include coverage of non-urgent hospitalization in approved hospitals overseas, and home palliative care.

- A survey by Zurich International Life showed that a majority of Singaporeans worry about their ability to pay their mortgages while expatriates are fretting over smaller incomes.

- Chinese Central Bank said that it would keep its interest-rate policy flexible and dependent on the results of upcoming first-quarter economic data.

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