Direct beneficiaries of infrastructure spending. Governments worldwide have pump-primed their economies to buffer impact of the global economic slowdown. However, the multi-billion dollar capital injections have yet to present substantial direct benefits to companies, save for a small handful like Midas Holdings (Midas) and Rotary Engineering (Rotary), which have both recently won infrastructure-related projects worth about RMB1b and US$700m respectively. The contracts will underpin earnings and serve to tide these companies through a potentially long drawn recessionary period.

Midas: Getting the first tranche. We recently spoke with management and are particularly positive on the recent contract win flurry due to the following: 1) In winning such a large chunk of China's first tranche of railway investments, Midas has filled up its order books for the next two years. This eliminates the uncertainty of "hoping" for a similar quantum of investment in 2010; 2) Its downstream processing efforts have borne fruit with its first RMB73.8m contract. This will further distance itself from any upcoming competition; 3) Focus on high speed trains by the PRC government will act as higher barrier to entry for new players; 4) We have not heard its substantially larger peer, China Zhongwang, winning any contracts to date.

Rotary: Riding on 287bn barrels of Saudi oil. Rotary's estimated US$700m contract win with its JV partner, Rafid Group, puts the Company on a new playing field. The SATORP project in Jubail, Saudi Arabia is touted as a showcase refinery for the nation with its processing capability of 400,000bbl/day. The full-conversion refinery will maximize production of diesel and jet fuels, and will also produce 700,000 tons per year (t/y) of paraxylene, 140,000 t/y of benzene and 200,000 t/y of polymer-grade propylene. With the completion in 2013, Rotary will get stable earnings from this project for the next four years.

Rock solid in unstable times. Contrasted with the uncertain operating environment, along with the still unthawed credit freeze, Midas' and Rotary's net cash positions, good operating cash flows and better earnings visibility in next 2-4 years provide investors a relative safe haven. We have maintained our estimates and BUY ratings for both companies as these infrastructural projects will bring earnings stability. We have upped our fair value for Midas to S$0.90 (prev: S$0.85) based on 16x FY10F EPS (prev: 15x). Our fair value for Rotary remains at S$0.81.