Midas warns of losses

Reasons include lower revenue and higher operating expenses and finance costs.

OCBC Investment Research noted:

Midas Holdings has issued a negative profit guidance prior to its upcoming 2Q12 results release. Similar profit guidance was also given before its 1Q12 and 3Q11 results release, in line with the slowdown in China’s rail transport sector.

Midas expects its 2Q12 and 1H12 results to be significantly lower on a YoY basis. This is within our expectations as we had earlier highlighted our belief that Midas could report a lackadaisical set of results for 2Q12 in our 9 Jul 2012 report.

Midas also guided for 2Q12 net profit to be significantly lower than 1Q12. This came as a surprise to us as we had expected a sequential improvement in its bottomline. We believe this can be attributed to a significantly wider share of loss from its associated company, Nanjing SR Puzhen Rail Transport (we forecasted for a share of profit of RMB3.6m).

Other reasons for Midas’ negative guidance include lower revenue and higher operating expenses and finance costs. Midas is slated to release its 2Q12 results next Tuesday, 14 Aug, after market close.