Midas Holdings Limited’s (Midas) 3Q16 revenue grew 2.1% YoY to RMB420.8m, mainly due to the consolidation of results of its recently acquired Aluminium Alloy Stretched Plates (AASP) business.

The additional RMB123.0m from AASP offset the 27.3% YoY decline in revenue from its Aluminium Alloy Extruded Products (AEP) segment, which came in at RMB297.0m. 3Q16 overall GPM fell 1.9ppt YoY to 24.0%, largely due to a 1.3ppt decline in AEP’s GPM to 24.8%.

3Q16 selling and distribution expenses grew 19.7% YoY but were more than offset by a 17.5% decrease in finance costs on lower interest rates of bank borrowings.

In addition, 3Q16 was boosted by a 391.9% YoY jump in the share of profits of an associate (NPRT) due to increased delivery to its customers during the quarter. Consequently, 3Q16 PATMI jumped 62.5% YoY to RMB22.6m.

For 9M16, PATMI rose 40.9% YoY to RMB51.2m, and formed 92.8% of our FY16 forecast, driven mainly by cheaper finance costs and higher share of profits from NPRT. Pending more details from management, maintain HOLD on Midas but place our FV of S$0.25 under review for now.

Source: OCBC Research - 15 Nov 2016