Summary: Midas Holdings’ (Midas) 1Q10 results were in line with expectations. Revenue accelerated 47.5% YoY to S$46.1m, gross profit gained 13.8% to S$15.0m, and net profit from continuing operations increased by 23.8% to S$9.9m. The group’s growth was driven by the aluminium alloy division which delivered a 49.7% growth in revenue to S$44.5m. Margins came under pressure as high raw material costs resulted in a 9.7ppt YoY decline in gross profit margin to 32.6%, but we see no cause for concern as our projections have factored in a decline in margins on the back of intensifying competition. Midas has several catalysts in the pipeline, including its impending Hong Kong secondary listing, as well as earnings growth fuelled by ongoing capacity expansion. The stock’s recent pullback enhances its attractiveness and our BUY rating remains intact. We rollover our valuations and raise our fair value estimate to S$1.58 (previously S$1.30). (Lee Wen Ching)