MIDAS HOLDINGS LIMITED. Investor Presentations 30 Sep 2004

Transcription

1 MIDAS HOLDINGS LIMITED Investor Presentations 30 Sep 2004

2 MIDAS HOLDINGS LIMITED Executive Chairman CEO Other Board Directors Listed Market Capitalisation Chen Wei Ping Patrick Chew Chew Chin Hua, Chew Hua Seng, Zhang Xingbo, Gay Chee Chong 23 rd February 2004 on SESDAQ IPO raised S$12.65 million S$ 232 million 3 rd largest stock on SESDAQ Shareholders Management 76% 2G Capital 5% Free Float 19% Over 600 shareholders 2

3 OVERVIEW

4 MIDAS HOLDINGS Founded in 2000 Focus on manufacturing for China s large, fast-growing infrastructure needs Key products: Aluminium alloy extrusion products PE pipes 4

5 CHINA S GROWING INFRASTRUCTURE SPENDING Transport and Utilities sectors are the largest and second largest areas of infrastructure spending in China Together they account for 42% of all fixed asset investment in China, 1992 to 2002 Annual Investment in Utility Sector Annual Investment in Transport Sector Fixed Asset Investment in Utilities Sector (RMB bn) LHS RHS % 20% 15% 10% 5% 0% % of Total Fixed Asset Investment in China Fixed Asset Investment in Transport Sector (RMB bn) LHS RHS % 25% 20% 15% 10% 5% 0% % of Total Fixed Asset Investment in China Source: China Statistics Yearbook

6 HISTORY & STRUCTURE Aluminium Alloy Extrusion SOE established in 1973 Midas acquired assets in June % of group sales in H PE Pipes Established by private company in 1999 Acquired by Midas in July % of group sales in H % North East Industries Pte Ltd 100% 100% Jilin Midas Aluminium Industries Co., Ltd MIDAS Holdings Limited 100% Green Oasis Pte Ltd Shanxi Wanshida Engineering Plastics Co., Ltd. 6

7 ALUMINIUM ALLOY DIVISION Designs & manufactures large section aluminium alloy extrusion products 75 MN production line. Products include: Extrusion products up to 28 x 0.7m Tubes, rods bars up to 28 x 0.48m Key characteristics: Aluminium alloys substitute for heavier metals Widely used in transportation industry Quality standards achieved: ISO: 9000:1994, ISO: 9001:2000 One of few manufacturers in PRC able to produce large section, high precision products Factory located in Liaoyuan city, Jilin province Current capacity: 10,000 tonnes 7

8 ALUMINIUM ALLOY DIVISION Market: Power transmission (transmission cables, heat exchanges) Transport (high-speed trains, MRT/LRT trains, freight wagons) Mechanical forging (industrial machinery) Major customers in 2003: Chongqing Longlu Industrial Co (18%) Jilin Tianfu Economic & Trade Co (18%) Harbin Feida Mechanical Forging (13%) Xi an Xikai HV Electrical Co (6%) Henan Pinggao Electrical Co (4%) First international contracts in July New customers include Siemens, Alstom Sales, Profits 2003 Sales by End Usage S$mn H Revenue Gross Profit Gross Margin 20% 47% 41% 40% Net Profit Net Margin -141% 29% 22% 22% Forging industry 15.0% Power 61.0% Transport 24.0% 8

9 ALUMINIUM EXTRUDED PRODUCT MARKET Competition Only one other company has production line greater than 75 MN, focused on the building and construction sector Barriers to entry: High capex, advanced production technology High engineering content High precision quality products Branding Proximity to transport manufacturers Availability of power Midas is gaining new customers and gaining market share 9

10 ALUMINIUM EXTRUDED PRODUCT MARKET Growth Prospects Major energy distribution projects to drive demand for power transmission infrastructure, e.g. West to East Power Transmission Network, Three Gorges Dam, new power generating plants Growth in China s transport industry Most major Chinese cities building new MRT & LRT systems High speed train networks are being built across China e.g. regional lines, Shanghai-Beijing line 10

11 TRANSPORT PROJECTS H03 2H03 1H04 2H04 1H05 2H05 1H06 2H06 1H07 2H07 1H08 2H08 Current Projects Under Progress Nanjing MRT Guangzhou MRT Line 3 Tianjin MRT Shanghai Pearl Line Singapore Circle Line Metro Oslo MRT in Norway Upcoming MRT Projects Guangzhou MRT Line 4 & 5 Shanghai Yangpu MRT line Shanghai MRT line 1 extension 3 Shanghai MRT Line 1 extension 2 Nanjing MRT Line 2 Shanghai Line 2 extension Shanghai Shensong MRT Line Current booked contracts Upcoming potential contracts Planned MRT / LRT projects Chengdu Wuxi Chongqing Xi'an Harbin Zhengzhou Kunming Shijiazhuang Qingdao Jinan Shenyang Suzhou Wuhan Hangzhou Planned High Speed Train Projects Beijing to Shanghai Regional Lines Dalian to Haerbin Pearl Delta Ring Line Train Freight Wagon Replacement of Steel with Aluminium Alloy Wagon 11

12 PE PIPES DIVISION Designs, manufactures, installs PE pipes Main piping uses include: Gas piping networks Water distribution networks Waste disposal Key Characteristics: Non-toxic, non corrosive, easier to install High resistance to fire & static electricity Quality Management standards achieved: ISO: 9002:1994, ISO: 9001:2000 Three production lines in Ruicheng County, Shanxi province. Benefits from infrastructure development in Western China Current capacity: 9,200 tonnes 12

13 Users: PE PIPES DIVISION Gas transmission for municipal grid, water distribution networks, drainage, sewage Irrigation, mining piping networks Major customers in 2003: Jilin Province Jiyuan Oil & Natural Gas (13%) Shenzhen Fuel Gas (10%) Er Er Duo Si Dongshen Dongyuan (8%) Xi an Fuel Gas (7%) Beijing Jingyuan Huashang Trading (6%) Sales, Profits 2003 Sales by End Usage S$mn H Revenue Gross Profit Gross Margin 44% 50% 40% 41% Net Profit Net Margin 16% 36% 32% 25% Water 14.0% Others 10.0% Gas 76.0% 13

14 MARKET FOR PE PIPES Competition More than 10 major producers of PE pipes in China Most are state agencies, conglomerates including other businesses from auto parts, to distilleries and bio-tech Barriers to entry: High quality products required to remain competitive Branding Sales require good relationships with local governments, utilities Midas is gaining market share in PE Pipes by offering customised solutions 14

15 MARKET FOR PE PIPES Growth Prospects Gas transmission, water, sewage and waste infrastructure upgrades Currently in Shenzen, Xi an, Beijing, Chongqing, Jilin. Targeting major contracts in Inner Mongolia, Tai Yuan Agricultural irrigation projects China has vast pipeline infrastructure projects. PE piping will be used in transmission networks of cities tapping into these huge pipelines West to East Gas Piping & Transmission Network South to North Water Diversion, 3 canals of 1300km each Each year about two billion square meters of housing is built in China, and there is great demand for electricity supply, water supply, heating supply, and sewage treatment service Qiu Baoxing, Vice Minister of Construction, National Seminar for Privatization of Municipal Works,

16 FINANCIAL HIGHLIGHTS

17 KEY FINANCIAL HIGHLIGHTS Profit & Loss (S$ '000s) H Revenue 3,400 23,873 33,964 30,440 Cost of Sales (2,036) (12,302) (11,368) (18,156) Gross Profit 1,364 11,571 13,876 12,284 Gross Margin 40.1% 48.5% 40.9% 40.4% Operating Costs (1,481) (3,811) (3,788) (3,333) Operating Profit (117) 7,760 10,088 8,951 Operating Margin -3% 33% 30% 29% Depreciation (975) (2,313) (2,798) (1,371) EBITDA ,073 12,886 10,322 EBITDA Margin 25% 42% 38% 34% Net Interest (148) (741) (1,134) (487) Profit Before Tax (265) 7,019 8,954 8,464 Tax (1,516) Net Income (265) 7,019 8,954 6,948 Net Margin -8% 29% 26% 23% WA Shares in Issue 554,817, ,817, ,817, ,817,800 (split adjusted) EPS (cents) (0.05)

18 KEY FINANCIAL HIGHLIGHTS Cash Flow Summary (S$ '000s) H Operating EBIT 7,760 10,088 8,951 Depreciation/amort 2,313 2,798 1,383 Working capital- trade (7,055) (2,458) (5,900) Other operating items 4, Operating cashflow 7,780 10,785 4,434 Net interest/taxes/other (741) (1,134) (959) Cashflow from Operations 7,039 9,651 3,475 Capital Expenditure (2,364) (1,830) (56) Acq/Inv/disposals 186 2, Ord dividends paid - - (6,648) Other items 1,926 (261) (684) Decrease in net debt (5,095) 545 3,668 Cashflow from Investing & Financing (5,347) 816 (3,654) Net increase/ decrease in cash 1,692 10,467 (179) Cash at beginning of period ,468 Cash at end of period 1,978 10,468 10,289 Effect of consolidation (1,977) 18

19 KEY FINANCIAL HIGHLIGHTS Balance Sheet (S$ '000s) H Cash & Equivalents 1,978 10,468 10,289 Debtors - Trade 8,936 10,011 16,201 Inventories - Trade 2,786 6,181 7,931 Other Current Assets 1,977 2,555 2,162 Property, Plant, Equipment 37,864 36,102 35,793 Other Fixed Assets 2,234 2,142 2,149 Total Assets 55,775 67,459 74,525 Short Term Debt 16,193 2,777 8,572 Creditors - Trade 367 2,379 7,040 Other Current Liabilities 26,654 15,184 6,773 Due to Related Parties 6,292 15,888 - Long Term Debt - 15,004 2,688 LT: Due to Related Party - 8,390 8,390 Shareholders Funds 6,269 7,837 41,062 Total Liabilities & Equity 55,775 67,459 74,525 Gross Debt/Equity 258% 227% 27% Net Debt/Equity 227% 93% 2% Net Debt/Equity 327% 403% 23% (incl. Rel Party Loans) Return on Equity 112% 114% 1 H Net Income, Annualised 34% 1 19

20 H RESULTS (S$ '000s) H H Y/Y Revenue 16,606 30, % Cost of Sales (9,918) (18,156) 83.1% Gross Profit 6,688 12, % Gross Margin 40.3% 40.4% Operating Costs (1,868) (3,333) 78.4% Operating Profit 4,820 8, % Operating Margin 29% 29% Net Interest (605) (487) -19.5% Profit Before Tax 4,215 8, % Tax - (1,516) Net Income 4,215 6, % Net Margin 25% 23% WA Shares in Issue 554,817, ,817,800 (split adjusted) EPS (cents) % Net Debt 7, % Loans from Related Party 24,278 8, % Shareholders Funds 7,837 41, % Net Gearing 404% 23% incl. Related Party Loan Return on Equity 54% 17% Revenue growth driven by Aluminium Extrusion (116% yoy) and PE Pipes businesses (44% yoy) Group margins consistent Finance costs lower due to loan repayment following IPO Income tax payable for first time at reduced 16.5% 2-for-1 share split effective 2 July Dividend of 0.25 cents per share for both Q1 (split adjusted) & Q2 Payout ratio YTD of 47.6% Special dividend in May of 0.75 cents per share (split adjusted) 20

21 OUTLOOK

22 OUTLOOK FOR H Continued strong growth Strong orders for aluminium alloy extrusion products and PE Pipes Existing order books of S$50 mil New potential gas pipeline projects in Inner Mongolia, Tai Yuan Ongoing contracts for aluminium tubing in power transmission Transport contracts currently in progress: Singapore Circle Line Nanjing MRT Guangzhou MRT Line 3 Tianjin MRT Metro Oslo MRT Shanghai Pearl MRT Line Partial recognition of freight train wagons contract Made inroads into international markets Siemens contract (Metro Oslo) to be partially recognised in H2 22

23 FUTURE GROWTH Increased marketing efforts are bearing fruit See strong enquiries from existing customers & MNCs New potential customers in PRC Increase exports to overseas markets Target 10% export sales in 2005 New clients in Europe, Middle East Leverage on expanded production capacity in Aluminium Extrusion Potential for new markets & uses for large section aluminium alloy extrusion products in the PRC 23

24 CONCLUSIONS Manufacturing for China s infrastructure needs High growth areas: transport and utility sectors High engineering content to our products: operating margins >30% New product areas under development Experienced management Impressive track record Focused on core business Management owns 76% of Midas Strong sales performance Brands gaining market share Gaining new clients in China Gaining traction with MNCs Future export potential Strong financial performance Annualised ROE of 34% in H1 H1 net income growth of 65% Sustainable double digit growth 24