Midas Holdings Limited’s (Midas) 1Q15 revenue grew 8.0% YoY to RMB320.6m, driven by higher revenue from its Aluminium Alloy Extruded Products Division, which grew 7.8% to RMB319.5m. Even though Midas recorded a 4.8ppt YoY improvement in gross margin to 28.8%, selling and distribution as well as administrative expenses increased 20.1% and 20.2% to RMB16.5m and RMB40.4m, respectively.

In addition, finance costs jumped 53.2% to RMB35.2m due to interest expense of its Medium Term Note Programme. Start-up costs for its new plant without revenue generation continues to erode its earnings as we had highlighted earlier. Consequently, 1Q15 PATMI declined 5.3% to RMB10.9m, forming only 17.8% of our already conservative FY15 forecast. Pending management briefing later, we maintain our HOLD rating on Midas but put our FV of S$0.375 under review for now.

Source: OCBC Research - 15 May 2015