TRC's 1QFY12 topline and core earnings of RM94.7m and RM1.3m respectivelywere below both our and consensus estimates. The numbers were again undermined by slower-than-expected progress at its RM950m LRT extension, similar to what happened in 4QFY11. That said, we expect the momentum to pick up progressively in 2HFY12 as all the relevant approvals on the LRT job were secured in April. We maintain our TRADING BUY call, with our FV at a slightly lower RM0.75.
Disappointing 1QFY12. TRC's 1QFY12 revenue amounted to RM94.7m (-5.8% y-o-y; flattish q-o-q) while earnings stood at RM1.3m (-77.2% y-o-y; -47.4% q-o-q). Both numbers lagged behind our forecasts, accounting for 15.0% and 5.3% of the annual estimates respectively. We attribute this to the slower-than-expected progress at its RM950m Kelana Jaya LRT extension project, which ran into a snag due to delays in obtaining approvals from the relevant authorities, which the company also encountered in 4QFY11. Having said that, we understand from management that it has obtained all the necessary approvals for the said project in April and construction progress is likely to normalize in 2HFY12. Out of the RM950m project value, some RM100m has been recognized in TRC's books.
Look forward to a better 2HFY12. Having secured the RM459m contract for the construction of the Sungai Buloh depot as part of the KV MRT, TRC's outstanding orderbook now stands at RM1.7bn, which should last the company for more than 2 years. Although the execution has been slower than expected, with an anticipated flat 2QFY12 ahead, we expect TRC's earnings to normalize in 2HFY12, driven by its LRT extension project. Nonetheless, factoring in the likely subpar earnings in 1HFY12, we are revisiting our model and slashing our FY12 net profit estimate by 17.6% to RM20.7m while leaving our FY13 numbers unchanged.
TRADING BUY.Given its solid orderbook with RM1.7bn worth of jobs in hand and with the disappointment in earnings possibly over since the approvals required have been secured to pave the way to begin work on the LRT extension project, we maintain our TRADING BUY call on TRC. Following our earnings revision, our FV now stands at RM0.75, based on an unchanged 14x FY12 PER on its construction earnings.