Prospects still bright for TRC, construction pace to pick up soon
Posted on August 7, 2012, Tuesday
KUCHING: TRC Synergy Bhd’s (TRC) outlook remains bright given potentially strong boosts to it earnings visibility as the construction pace starts to pick up across the nation, including bright prospects in the state via projects under the Sarawak Corridor of Renewable Energy (SCORE).
The research arm of TA Securities Holdings Bhd (TA Securities) noted in a research report that for construction segment,TRC’s outstanding order book stood at about RM1.9 billion, of which the two biggest projects in hand, the Kelana Jaya line LRT extension and KVMRT Sungai Buloh Depot, made up two-thirds of the total outstanding order book.
“The current tender book is about RM2.5 billion, of which about RM1.6 billion is for SCORE projects in Sarawak, and RM300 million to RM400 million is for projects in Brunei.
“Trc holds the license of Unit Pendaftaran Kontraktor Negeri Sarawak (upk) that allows the company to bid for the state funded projects.
“We see TRC could benefit from the development at SCORE, Sarawak.
“This could be witnessed from the substantial portion, about two-thirds of the tender book is for projects at SCORE,” the research team observed.
In addition, ta securities stated that trc (with a market capitalisation of rm307.2 million) was likely to be a beneficiary of the recently launched government transformation programme 2.0 (Gtp 2.0).
One of the seven National Key Result Areas (NKRAs) under GTP 2.0 is to improve rural basic infrastructure which involves achieving 95 to 99 per cent of the population having access to roads.
To achieve this, 5,139 kilometres (km) of roads would be constructed, of which 2,618km, 1,007km and 1,514km of the roads were located in peninsular Malaysia, Sabah and Sarawak respectively.
“Given the advantage of having experience in the road construction and its presence in the construction works in peninsular Malaysia, Sabah and Sarawak, the chance of trc securing some packages of the works looks bright,” the research team opined.
It lowered the margin assumptions for various construction projects after taking into consideration of low single digit profit before tax margin achieved in the recent quarters.
We also It also lowered its financial year 2012 (FY12) and FY13 earnings projections by 21 per cent and 22 per cent respectively in addition to revising the in-house order book replenishment assumptions to RM500 million each for FY13 to FY14.
The research team rolled forward its valuation based on 2013 earnings and arrived at a fair value of RM0.715 per share, based on revised 10 times earnings and projected dividend payout of two sen per share for FY13.