Midas approaching compelling entry point - DMG

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED
Research House: DMG

Midas Holdings (5EN.SG) is off 3.5% at $0.835, and is today’s third most active stock with 28.2 million shares traded, as uncertainty shrouds China’s railway sector after the dismissal over the weekend of the country’s railways minister for a “severe violation of discipline.”

DMG analyst Tan Han Meng says shares are down 11% on-week and are approaching valuation support at minus 1-standard deviation historical P/B of 1.8X, “"which offers a compelling entry point.” 

He maintains a Buy call and $1.20 target, pegged to 20X FY11 P/E. “From a historical valuation since 2005 it’s trading close to the lower end of its P/B trading band, so we think it’s a good time to buy.” 

He adds, China’s rail sector has been rewarded with quite high valuations, “so changes on the political front will cause a bit of volatility, but we view that China will continue with its (high speed rail) policy, but at this point in time, most people are adopting a wait and see stance.” Orderbook suggests $0.800 support.