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PublicInvest Research

Author: PublicInvest   |   Latest post: Mon, 21 Oct 2019, 9:38 AM

 

TRC Synergy Berhad - Disappointing Quarter

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TRC Synergy delivered a weaker-than-expected 2QFY18 net profit of RM4.7m (+20.5% YoY, >100% QoQ) primarily due to lower margins recorded and higher tax costs. In 1H2018, its net profit of RM4.2m excluding foreign exchange gains was below our and consensus expectations at only 16% of full-year estimates. As such, we revise downwards our FY18-20 earnings by 33%/19%/9% respectively to account for higher tax and lower margins. We understand that outstanding order book is still healthy at c.RM2.4bn, with the company tendering for a few more building jobs this year. As mentioned in an earlier report, we believe its existing projects are not at risk of being cancelled albeit competition for new jobs might get stiffer going forward. With the new set of earnings assumptions, we cut TRC’s TP to 45sen (50sen previously), unchanged at c.6X PER to FY19 EPS. Our Neutral call is maintained.

  • Construction revenue visibility. We estimate the Group’s outstanding order book to still be at RM2.4bn which is largely unchanged from a quarter ago, ensuring earnings visibility for the next 2-3 years. To recap, the Group’s main on going jobs, among others, include LRT3 package, MRT2 package (awarded to the KKM-TRC consortium) and Pan Borneo. As for tender book, we understand that it is tendering for few building contracts this year.
  • Ara Damansara property development project. The long-awaited Ara Damansara property project is now believed to be at the last stages of finalization, which consists of service apartments, hotel, office block and retail mall. The total estimated GDV for the project is c.RM1bn. We understand that the first phase is estimated to be c.RM300m and the launch is yet again deferred to early 2019 due to slower than expected authority approvals.

Source: PublicInvest Research - 30 Aug 2018

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