Previous day closing price: $0.525
Recommendation: Buy
Target price: $0.69
Yield: 2007 - 3.8%, 2008F - 2.9%
Midas established a strong presence in the highly specialised aluminium alloy train profiles market in the PRC within a short span. Despite being a late entrant, it has secured an impressive 80%-market share for components that are used in high-speed train/metro bodies. It is also the only PRC supplier certified by all top three global train manufacturers: Alstom, Siemens and Bombardier.
Due to its prudent stance and effective capital management, Midas has been in a net cash position since its listing despite paying attractive and regular dividends. This will allow the group to fund its expansion plans for the next growth phase, including capex plans of S$85m.
With FY09 being a year of consolidation for Midas as its 3rd production line and downstream fabrication activities come onboard, we have used FY10 estimated profits in our SOTP approach. We value Midas at 12X its net core earnings and 15X NPRT net profits. Our target price of S$0.69 will provide a 31.4% upside.
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