TRC (5054)-Main market, Construction

Anticipate a stronger FY25-26 after hitting a 10Y trough in FY24 TRC fell from YTD high of RM0.53 (3 Apr) to a low of RM0.44 (30 May) following a weak 1Q24 results, driven by lower-than-expected construction billings while property slowdown was underestimated. Although earnings in the coming FY2024 quarters to remain lacklustre, we expect stronger FY25-26, driven by decent unbilled orderbook of RM850m (1.8x cover). Moreover, with more infrastructure projects expected to materialise in 2H2024, TRC could be a beneficiary of this healthier environment. Projects we believe TRC will participate in are LRT, MRT3, remaining KUTS packages, road projects in East Malaysia and airport jobs. Meanwhile its property segment could stay soft until Phase 2 Ara is launched in 1Q25. 

HLIB maintains a BUY rating with unchanged SOP-driven TP of RM0.60 (a 40% discount to SOP value of RM1.00). Key appeal remains its traded share price at 28% discount to net cash per share of RM0.65. 

Technical view TRC is trading at 12.7x FY25E P/E (sector avg 17x). After falling from RM0.53 (3 Apr) to a low of RM0.44 (30 May), the stock is likely to bottom up as technical indicators are on the mend. Downside is likely to be cushioned by netcash of RM0.65, with key supports at 0.42 (200D MA) to 0.44. A successful breakout above 0.48-0.50 hurdles may spur greater upside towards 0.53-0.55-0.57 zones

✅Current price: RM0.47
✅Entry: RM0.44-0.46-0.47
✅Resistance: RM0.50-0.53-0.57
✅Cut loss: RM0.435
✅Risk profile: Low

Source: Hong Leong Investment Bank Research - 14 Jun 2024