KEVIN SCULLY: Stock Weakness provides good buying opportunity

This was posted yesterday (Feb 22) on www.nracapital.com and is republished with permission


Kevin Scully, executive chairman, NRA Capital.
NextInsight file photoMIDAS HOLDINGS has issued a profit warning today cautioning investors that 2012 will see a significant drop in revenue and profit.

The shares have fallen 5.5% or 3 cents today on this news to S$0.52 at the point of writing this article.

This announcement is not new. In its nine month results release in November 2012, Midas reported a 24% decline in revenue to RMB652.9mn while net profit fell 93.1% to RMB10.4mn.

So a weak 2012 is already known and in my opinion already discounted.

Midas stock traded at around 35 cents in Nov 2012 and has recently reached the 55-cent level before correcting to 52 cents yesterday (Fri).What is more important for investors is that in the first two months of 2013, Midas has announced that one of its operating entities has secured two contracts worth more than RMB1bn.

I started recommending Midas when I took the view that 2012 would be the worst and that with the new Chinese Government in power and a recapitalisation of the coffers of the Rail Ministry that the latter would continue to start awarding rail contracts again.

Contract awarding was stopped shortly after the Shanghai rail accident in September 2011. The two new contracts in 2013 is a signal that this view is still ontrack.

I still like the stock and further weakness in Midas shares provides a good buying opportunity especially if they fall below the S$0.50 level.

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