The Daily Pulse of Bursa Malaysia

TRC Synergy a potential beneficiary of Penang LRT project

zaclim
Publish date: Thu, 04 Apr 2024, 08:49 AM
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The announcement of Gamuda Bhd securing the Penang LRT job was a boon for the construction giant although its share price was rather muted. But there are also other construction outfits which will stand to secure a slice of the LRT project.

One example is TRC Synergy Bhd, which is a relatively small construction and property development counter with a market cap of about RM237 million.

Nevertheless, market players are anticipating the company to participate in not only the Penang LRT, but other big ticket jobs as well. These include the MRT3, remaining KUTS package, road packages in East Malaysia and an airport job.

Such optimism probably drew investors’ interest as the counter touched a year high of 53 sen recently. The stock is now riding high after coming from a low of 32 sen in June last year. Over the past year, TRC has gained some 47% to close at 50 sen on Apr 3.

Investors believe TRC is well-positioned as a strong contender for Penang LRT and MRT3 due to its Bumiputera contractor status. The company also has an extensive track record in mega railway projects encompassing stations, viaducts, and depots.

This strong orderbook was bolstered by the group securing one substantial project in FY24 YTD – an airport project at a contract size of RM358 million. Investors in TRC are surely delighted with this unexpected airport project, as they are getting jittery over its dwindling orderbook. Looking ahead, with infrastructure projects expected to materialize in FY24, TRC could be a beneficiary of this positive development.

The best part of the TRC is it has a healthy balance sheet with net cash. Investors are hoping for some catalyst for the counter after posting a lacklustre FY23 earnings performance.

However, analysts are anticipating a turnaround for TRC, with FY24 and FY25 expected to record 48% and 8.4% YoY growth, respectively. Our optimism is based on the anticipation of a strong performance in both the construction and property segments. Its unbilled orderbook currently stands at RM750m, translating to 1.4x cover on FY23 construction revenue.

As for its property segment. TRC saw a 100% take-up rate for TRC’s flagship Ara Sentral Phase 1. It will begin Phase 2 of the project (with a GDV RM500 mil - RM600 mil) in 3QFY24, with the launch slated for 3QFY25. With all indications pointing to a better financial position for TRC, its share price will only reflect the company’s fundaments accordingly.

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