Midas kept at ' buy' by DBS with 49 target price as recovery gets underway
December 1, 2015: 12:56 PM
DBS Group Research is maintaining its " buy" call on Midas Holdings (Valuation: 2.00, Fundamental: 0.45) with a 49 cents target price as the research house sees a more substantial recovery for the company from 2016 onwards as contribution from its new aluminium plate and sheet plant kicks in.
In a Tuesday report, analyst Paul Yong says the completion of the alloy plate and sheet plant will raise the group' s capabilities by boosting Midas' annual aluminium alloy production capacity from 50,000 tonnes in FY15 to 160,000 tonnes in FY16.
" It should help to diversify its revenues away from the rail segment as the new alloy plate and sheet products will also be in demand from the aviation, shipbuilding, automobile, general industry and packaging sectors," says Yong.
As it is, Midas has an order book of over RMB1 billion ($ 220 million) for its core aluminium alloy extrusion segment, and over RMB10 billion for its associate Nanjing Puzhen Railway Transport, putting is in a good position to win more orders to raise its utilisation and earnings on the back of firm demand for high-speed and metro trains in China and abroad.
" We see the stock rerating towards our TP of S $ 0.49, based on 0.9x FY16 P / BV as earnings improve and ROE increases," says Yong.
Midas is down 1.6% at 30 cents.
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