MARKET PULSE: Midas, M1 (16 Oct 2012)

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.51

Stock Name: M1
Company Name: M1 LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.80

MARKET PULSE: Midas, M1

16 Oct 2012

KEY IDEA Midas Holdings: Engines just getting warmed up We maintain our BUY rating on Midas Holdings (Midas) and raise our fair value estimate from S$0.435 to S$0.51 in light of the brighter prospects in China's railway sector. The latest data on total railway fixed asset investments (FAI) in China exhibited an encouraging 92.7% YoY surge to CNY72.7b for the month of Sep, which we believe highlights the progressive recovery in the sector. Another positive development came from the China Ministry of Railways' (MOR) decision to raise its 2012 railway FAI target from CNY610b to CNY630b, having only previously done so in Sep. Moving forward, we see further re-rating catalysts for Midas when China's MOR resumes the re-tendering of new HSR passenger train car contracts in the near future and continued traction gains in Midas' orders win momentum from the urban rail and power industries. (Wong Teck Ching Andy) MORE REPORTS M1: Sees QoQ improvement in 4Q12 M1 Ltd reported another set of softer-than-expected set of 3Q12 results yesterday. While revenue of S$254.7m (+4.0% YoY and +9.6% QoQ) was largely in line with our expectations, another sharper-than-expected decline in margins saw net profit falling some 19.5% YoY and 6.0% QoQ to S$33.1m. Nevertheless, management remains confident that 3Q12 net profit is probably the lowest for this year as it now guides for QoQ improvements in both top and bottom lines. But for the full-year, it has not changed its previous guidance given in 3Q, as it continues to expect the handset subsidies expensed upfront to have an impact on profitability. As such, we are paring our FY12F earnings by another 2.8%. However, we are leaving our dividend forecast of S$0.145/share unchanged, given its ability to generate strong free cashflows. Our DCF-based fair value also remains at S$2.80. Maintain BUY. (Carey Wong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - U S stocks climbed on Monday, led by gains in the financials healthcare. The Dow rose 0.7% to 13,424.23, led by Bank of America Corp. and Merck & Co. The S&P 500 Index climbed 0.8% to 1,440.13, with Citigroup Inc. as the top performer with better-than-expected earnings. - K-Green Trust - will be renamed Keppel REIT - posted 9M12 profit after tax of S$11.4m versus S$11.7m in 9M11. It will commence quarterly DPU payments from Oct, and 3Q12 DPU of 1.96 S cents will be made on 27 Nov. - Jackspeed Corporation registered 1H13 PATMI of S$258k, up 659% YoY. Revenue had climbed 62% YoY to S$21.0m. - IEV Holdings Limited has entered into a memorandum of understanding with Gas Malaysia Berhad to conduct a feasibility study on liquefied natural gas distribution in Malaysia. - Food Empire Holdings has incorporated a wholly-owned Nigerian subsidiary to provide marketing support for its products. - LionGold Corp Ltd has outlined operational plans for its main gold interests in Ghana and Australia, focused on increasing output, reducing production costs and increasing mine life.