Optimistic on China's railway industry. Midas remains optimistic on China's railway industry, as the Chinese government continues to invest in the railway infrastructure. The Chinese government expects to spend RMB650bn in 2013, to enhance the railway network. Midas stands to benefit from this as there would be a growth in orders for railway train cars. Although the government has not awarded any contract yet, management indicated that it continues to engage its customers, and is optimistic that it would be able to secure more new contracts. It currently has an order book of RMB400m, while that for NPRT is RMB7.5bn.

Receivables turnover days at relatively high levels. Midas' receivables increased 44.4% YoY to RMB1.0bn as at end FY12, largely due to the slowdown in the railway industry. Management remains confident about the collectability of its receivables (from state-owned enterprises), especially when the industry picks up further from 2H13.

Maintain BUY; TP SGD0.75. Midas is currently trading at 1.0x FY13F P/B. We think FY13 should be a better year, but FY14 would be much better once the orders start coming in as the government builds up the network.

Source: OSK