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Midas: no official news from China on slowdown on infrastructure spend
MIDAS Holdings clarified that there has been no official announcement from the relevant government authorities in China about a policy change on the expansion of the country's rail transportation network and as such, its prospect statement in its results announcement "remains valid".
It said this in a response to queries from the Singapore Exchange (SGX) on whether its outlook statement still holds given news reports alleging the suspension and halting of plans for railway projects by the Chinese government for certain cities.
The company said that the prospect statement was developed based on a report issued by the Transport Ministry on Oct 26 that was published in the Chinese government's official news website and recent news reports citing data from a senior official from the ministry as well as estimates from experts.
Earlier, in a news release dated Nov 13, Midas had said that following the "19th National Congress of the Communist Party of China, the Ministry of Transport of the PRC reiterated its commitment in ensuring that the country has a well developed transportation system".
The company had also said then that experts estimate that by 2020, 50 cities in China will have metro lines totalling 6,000km, with total investments expected to exceed four trillion yuan (S$816.9 billion).
The SGX also asked Midas to explain the reasons for the increase in trade and receivables to 2.44 billion yuan while revenue stood at 1.36 billion yuan for the nine months to end-September 2017 to which the company replied that trade receivables arose from the sales of aluminium alloy extruded products, aluminium alloy stretched plates and PE pipes (polyethylene pipes) by contracts that are still on-going or purchase orders.
Trade receivables are non-interest bearing and are generally on three to 10 months credit terms. Midas said that it had extended credit terms to retain customers as some of its major customers had been slow in payment since the railway incidents in the PRC in 2011.
"Majority of the trade receivables are PRC's state-owned enterprises, renowned train manufacturers, trade receivables who are also our trade payables whereby the amount can be offset," it elaborated.
The other part (of trade and other receivables) that involved advances and prepayments are made mainly to the company's long-term suppliers who had been supplying the group for many years, and also to secure long-term supplies of raw materials.
"To the best of our knowledge, nothing has come to the attention of the board to change our view about the collectability of the significant outstanding amount of trade and other receivables," it added.