Diversification, the Midas curse

TO understand China's Old Economy problems, one just needs to examine the S-chips in Singapore's backyard.

The latest company falling foul of investor patience is Midas Holdings, a train car body maker founded in 2000 by Patrick Chew, a Singaporean businessman with a rags-to-riches story, and a Chinese partner, Chen Wei Ping.

Shares have slumped a third in just a few weeks to S$0.14 a share, a historic low. The company is now trading at just one-third of book value, at a historical earnings multiple of under 10 times.

What alarms investors, it seems, is firstly how receivables keep piling up and debt costs continue to bite, even while revenue and profit growth are failing to keep up.

The fundamentals have deteriorated markedly in the past five years even as Midas spent billions of yuan to diversify its revenue sources and expand it…