We visited Midas last week where we had a positive first-hand look at its aluminium alloy division in Jilin Province and the NPRT operations in Nanjing, PRC. In this visit, we also had insightful discussions with the local operations management about the business and industry prospects. Overall expansion plans appear on track.

Midas is in the midst of installing its 3rd production line, which would increase its annual capacity from 20,000 to 30,000 tonnes. We now expect this to be operational by end 09/ early 10. Downstream fabrication machineries are also being installed at its new site, which we believe will put Midas further ahead of the competition when they are ready by 2H09.

NPRT is in the midst of an aggressive capacity expansion plan, backed by its strong S$1b orderbook. Based on our discussion with the NPRT management, we believe the delivery schedule for this year will be 3-4 times higher than FY08. To cope with the increase, manpower has increased from 500 (end 2008) to 900 now.

China’s MOR recently signed a deal with the China Northern Railway Group (CNR) for the purchase of 100 high-speed train sets. This is equivalent to 1,600 train cars or the requirement of about 16,000 tonnes of aluminium alloy extrusion products for its train bodies. Industry sources reveal that this is the harbinger for another 700 train set purchases over the next 3-5 years.

NPRT’s delivery schedule for FY09 gives us optimism that our associate earnings estimates can be met. Given that organic expansion plans will likely only bear fruit for FY10, NPRT will be the main contributor to bottom-line growth for FY09. We have kept our estimates and target price of S$0.68 based on SOTP unchanged.