Credit Suisse keeps Midas at Outperform; limited earnings risk

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED
Research House: Credit Suisse

Credit Suisse keeps Midas Holdings (5EN.SG) at Outperform with $1.20 fair value. The house says Midas’ shares have come under pressure in recent days, on the back of press reports that China’s Minister of Railways is being investigated over an alleged ’severe violation of discipline.

“Investors are likely concerned that this may indicate a change in China’s railway growth model, which could slow order momentum. We expect further clarity in the coming months, but given the new minister’s commitment to continue with plans for railway system expansion, while prioritizing safety and quality standards, we believe Midas is better advantaged given its strong track record in China and customer certifications.” 

The house estimates Midas’ order book is supported by CNY1 billion in contracts, contributing 60%/20% of FY11/FY12 revenue estimates; “For now, we see limited earnings risk, given expectation of further orders into the year.” 

Shares are off 3.5% at $0.820.