The FY 2014 results has just been released and overall financial results seemed to have improved. The revenue had increased by 14.8% from RMB1148 to RMB1318m. The net profit attributable to shareholders improved even more at 18.1% from RMB47.7m to RBM56.4m.
Despite the good or at least decent results, it still does not call for celebration. The administration cost and the finance cost are putting a huge drag on the company’s profitability. In fact, if it is not for the huge reduction in the income tax expense, the net profit might be worse than last year. This is all because of the 26.6% increase in the administration cost, and even more, the 68.5% increase in the financial cost.
The top-line, that is the revenue, over the 5 years from 2010 to 2014 had already increased by almost 30% from about a little above RMB1billion to more than RMB1.3billion, perhaps already indicating that the railway authority had increased the railway spending. Unfortunately, the bottom line seemed to have weaken primarily due to the increasing financial cost. The FY 2014 cash flow statement showed that within FY 2014, it had a new borrowing of RMB1834 million and a repayment of RMB1440 million. This means that the company is still a net borrower and this would mean that the financial cost will continue to increase in FY 2015. Unless Midas can continue to increase its revenue and arresting its cost, in particular reducing its debts, its profit for FY 2015 will continue to be affected.
(Brennen Pak has been a stock investor for 25 years. He is a chief trainer for BP Wealth Learning Centre LLP. He is the author of Building Wealth Together Through Stocks.)