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Midas Holdings - Picking up speed

Shared By Stock Fanatic on Monday, March 2, 2015 | 2.3.15

■ FY14 beat by 7% thanks to 4Q tax benefits

■ Midas still provides cheaper exposure to China’s high-speed rail sector. Cut EPS by less than 5% for lower revenue from new plant.

■ Maintain BUY with lower TP of SGD0.50 from SGD0.52, still at 1x FY15E P/BV. Catalysts from order wins.

Lift from tax benefits
4Q14 revenue was flat YoY but net profit jumped 64% YoY thanks to CNY17m deferred tax income. FY14 revenue grew 15% YoY on higher orders from the high-speed rail sector. Net profit sprinted 18% YoY to CNY56m, 7% above our expectation. A final dividend of 0.25 SGD ct was proposed, the same as last year. 

Other highlights were: 
1) a higher GPM from higher contributions from high-speed rail orders; and 

2) strong associate contributions from NPRT as more train cars were delivered to customers.

Technical Analysis
Daily Chart
Cheaper exposure to high-speed rail sector
We continue to expect China’s railway sector to grow strongly in the mid-to-long term, underpinned by its government’s continuing investment. China’s growing participation in the global railway market should also provide additional impetus to industry players. A proposed merger between CNR and CSR could increase their competitiveness globally and benefit their suppliers, including Midas.

We cut EPS by less than 5% for FY15E-16E for lower revenue contributions from its new plant for aluminium alloy plates and sheets. This is expected to commence production by 2H15. Maintain BUY for catalysts from order wins. TP dips to SGD0.50 from SGD0.52 after our EPS changes, still conservatively set at 1x FY15E P/BV. (Read Report)

Read Related Reports
Midas Holdings - Earnings recovery in 4Q14
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Midas - Strong Results But Stock Remains Expensive
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- DMG/OSK Group Research

Source : Maybank Kim Eng Research

Posted on Monday, March 2, 2015 | 2.3.15
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