Published July 2, 2009

Midas bags contracts worth 73.8m yuan

By JOANNE TANG

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MIDAS Holdings has clinched its first two downstream fabrication contracts worth 73.8 million yuan (S$15.6 million), as part of its bid to become a one-stop service supplier to China's transportation industry.

The latest contracts brought to 918.8 million yuan the orders that the group has announced over two weeks. Midas' order book before these 918.8 million yuan of deals stood at $120 million. Based on this, BT estimates that its total order book now stands at some $300 million.

The contracts secured are in line with the revenue guidance of between $200 million and $300 million worth of new contracts that were being pursued by the company's management.

The group, which manufactures aluminium alloy extrusion products primarily for the Chinese rail transportation sector, has been benefiting from the Chinese government's fiscal stimulus package and the infrastructural development projects in the mainland.

The latest two contracts were awarded by CNR Tangshan Railway Vehicles Co Ltd and comprised 23 million yuan for aluminium alloy extrusion profiles and 50.8 million yuan for fabrication processing fees.

The first contract - worth 43.8 million yuan - involves the supply of 12 types of specialised stretch band, roll bend and press bend fabricated aluminium alloy extrusion profiles for 1,280 train car bodies.

The second contract - valued at 30 million yuan - involves the production of specialised stretch bend, roll bend and press bend fabricated curved surface profiles for 100 units of driver's cabins.

Commenting on the new contracts, Patrick Chew, CEO of Midas, said: 'These two contracts represent another key milestone for our group as they mark our successful foray into the business of downstream fabrication. Our foray into downstream fabrication marks the beginning of our long-term strategy to become an integrated manufacturer and one-stop service supplier to the rail transportation industry.'

A company spokesman has said that the majority of the contracts will be completed between 2009 and 2011. Thus, the contracts will have a positive impact on the earnings for financial years 2009 to 2011.

Over the past four weeks, the Bloomberg consensus analyst estimates for 2009 earnings per share have been revised upwards by 0.1 cents to 4.4 cents. The EPS for 2008 was 3.87 cents.

The series of new contracts secured have led some analysts to raise the possibility of a fourth production line. Currently, the company has two production lines and have invested in a third one which will only be ready in 2010.

The management has said that capital expenditure needs will be funded using a blend of internal funds and bank loans.