Did you know Midas Holdings stock in Hong Kong, where it has a secondary listing, went nuts last Wednesday afternoon (Jan 3)? How else to describe a 500% surge in the stock price in one afternoon? The news (see OCBC report below), released during lunch-break, that triggered it was significant. But a 500% stock surge? That's arguably over the top. That afternoon, the stock did go over the top and beyond, touching HK$8.10, a 938% surge. From HK$8.10, it has, in the next two days, crashed to HK$2.71 and you can have a field day speculating any number of reasons for that. HK$2.71 is SGD0.46, which is much higher than the SGD0.17 that the stock closed at on the Singapore Exchange last Friday. SGD0.17 translates into a forward PE of about 9x, according to Bloomberg. We leave it to the market to decide if 9X is fair or it should be the 25X PE that the stock now trades at in HK. Meanwhile, OCBC Investment Research has just given its final take on Midas before ceasing coverage ---> |
The following are excerpts from OCBC Investment Research report.
Analyst: Eugene Chua, CFA
Midas Holdings: Ceasing coverage
Midas Holdings Limited announced Wednesday that its JV unit (32.5% equity stake), NPRT, has secured three metro train car supply contracts worth RMB2.7b in China, with deliveries scheduled between Sep 18 and Sep 20.
Separately, back in Nov 17, Midas also announced that the holders of the outstanding Series 003 Notes had, by way of an extraordinary resolution in writing, authorised to extend the maturity date of the notes by one year, from 23 Nov 17 to 23 Nov 18.
While outlook over its core business seems positive as China continues to pour investments into building up the rail network in the country, the uncertainty with regards to the start-up and ramp up of its aluminium light alloy factory (JMLA) remains.
Furthermore, the extension of the notes required Midas to enter into the a letter agreement, for which the implication is that Midas has to put in place encumbrances on the company’s assets pursuant to the pledges and increased obligations of Midas. Hence, all considered, we believe the outlook of Midas remains mixed.
Due to a redistribution of internal resources, we are CEASING COVERAGE on Midas.