Results

9MFY13 PATAMI jumped by more than 200% to RM18.0m (3.77 sen/share), but still missed estimates by making up 69% and 65% of ours and streets’ estimates respectively.

Deviations

Due to higher effective tax rate. PBT actually made up 80% and 74% of ours and street’s estimates respectively.

Dividends

None. Dividends usually declared in AGM.

Highlights

3Q review… 3Q revenue continued to grow by 36%/8% YoY/QoQ to RM216.2m. However due to lower GP margin and higher expenses, PBT shrank by 14%/20% YoY/QoQ to RM9.4m. However, due to lower effective tax rate, PATAMI grew by 11% YoY to RM5.6m but fell by 18% QoQ.

9M review... 9M revenue grew by 58% to RM587.9m, whereby progress for its huge order book has finally begin to take off. Due to lower overhead cost and effective tax rate, PATAMI outpaced revenue growth to jump by more than 200% to RM18m.

Earnings visibility… Total outstanding order book of circa RM1.58bn, translating to 2.8x FY12’s revenue and 6.2x order book-to-market cap ratio.

Risks

• Single project concentration and execution risk in the LRT project;
• Regulatory and political risk;
• Rising raw material prices; and
• Unexpected downturn in the construction sector.

Forecasts

FY13-14 earnings trimmed by 10.8% and 5.6% respectively as we tweak our earnings model.

Rating

BUY

We continue to be encouraged by TRC’s turnaround in performance after 3 consecutive years of earnings decline. It is backed by a strong order book and will benefit from the LRT property development in Ara Damansara. Hence, we are maintaining our BUY call.

Valuation

Due to lower forecasted earnings, our Target Price is trimmed by 7.4% to RM0.63 based on unchanged 12x average FY13-14 earnings.

Source: Hong Leong Investment Bank Research - 29 Nov 2013