S$0.56-MIDS.SI
Midas’ 32.5% owned associate company Nanjing Puzhen has won 2 contracts worth a total of Rmb3.13bln to supply 402 metro train cars for Nanjing Metro Company for 2 projects (Nanjing Metro Line 3 Project and Nanjing Metro Line 10 Project). Delivery is expected to be from 2013-2015.
Nanjing Puzhen being based in Nanjing and having won 3 other Nanjing Metro Line Projects in the last few years, it should not be a surprise for them to continue to win projects within the Nanjing region. Being 32.5% owned by Midas, we believe Midas will be doing the train car bodies for Nanjing Puzhen.
While a positive for Midas and could well provide a short term boost to its share price given the oversold conditions, the key point is that all railway stocks in China as well as Midas remains in wellentrenched downtrend channels established since Feb’11 after the firing of the top official in the railway ministry for corruption charges.
And the continued negative news-flow in the sector continues on a daily basis with the latest being that a lot of travel agencies have received calls to cancel high speed travels right in the middle of the peak travel season with The Global Times newspaper quoting a manager as saying that close to 80% of their clients are switching to air travel instead of rail travel.
The above suggests that the well-entrenched downtrend channels for railway related stocks would likely remain in place not-withstanding near term bounces.
Midas’ close to 40% share price decline since Feb’11 is in line with that of the railway related stocks listed in China and Hong Kong.
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