We recently hosted Midas on a roadshow in Singapore. Highlights are: Management indicated that 1H13 will be challenging, but 2H could be stronger if things pick up. Visibility on how soon the Chinese government will award high-speed rail contracts remains low, but management is optimistic of the government's commitment. Asian countries are planning to improve their connectivity by building highspeed railways to neighbouring countries and Midas is in a good position to ride on this trend. Maintain BUY with a TP of SGD0.75, based on 1.5x FY13 P/B.

Starting to recover. FY13 is likely to be the year when Midas' operations begin to recover, although 1H13 is likely to be challenging. Management indicated that orders are starting to pick up, and 2H13 could be stronger. Its 32.5% JV, NPRT, is expected to record profits this year.

Visibility on schedule is hazy. While the Chinese government is expected to spend RMB650bn in 2013 to boost China's high-speed railway network, the speed at which new contracts can be expected remains unclear. Management is optimistic that the Chinese government will achieve the goals set out in its 12th Five-year (2011 - 2015) plan for the rail industry. This is supported by strong demand for railway transport in China. Upside risks to this stock is when the contracts are awarded much faster. Should orders start picking up strongly, Midas has the existing capacity to ramp up production quickly as well.

The future is promising. Asian countries are planning to improve connectivity to their neighbouring countries via high-speed rail. Having worked with and as a preferred partner for global train manufacturers (Alstom and Bombardier), we believe Midas is positioned to benefit from this trend.

Gearing is likely to increase, as Midas takes on new loan (USD200m) for its new aluminium plates and sheets JV plant. This plant is expected to commence commercial operation by 2015, and would contribute to revenue growth.

Source: RHB