BUY S$0.56
STI : 3,189.85
Price Target : 12-Month S$ 1.05
Midas Associate NPRT secures 2 metro contracts worth RMB3.13bn.
Midas announced that its 32.5%-owned associate, Nanjing Puzhen Railway Transport Co., Ltd has won 2 projects totalling RMB3.13bn. The first project is for the supply of 46 train sets (or 276 train cars) for Nanjing Metro Line 3 project for delivery between 2013 and 2015, valued at RMB2.15bn. The second is to supply 21 train sets (or 126 train cars) for the Nanjing Metro Line 10 project, valued at RMB980m, to be delivered from 2013 to 2014.
The firm orders from Nanjing are not surprising, as the city is gearing up to host the youth Olympics in 2014. Whilst obviously positive for Nanjing Puzhen, this win also implies potential follow-on orders for Midas in terms of aluminium train profiles of c. RMB100m worth of orders or more (assuming Nanjing Puzhen buys the profiles from Midas, which is very likely) so this development is positive for Midas' core business as well. Midas' share price has seen a substantial drop in recent days following the unfortunate accident in China, but we think the accident should not have a material impact on the investment and development plan of high speed railway in China (other than a renewed focus on safety). Furthermore, Midas is also well positioned to win orders from metro projects in China as well as overseas projects.
We maintained our recommendation and target price for Midas
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