Journey to Wealth
TRC Synergy - OUTPERFORM - 1 Jun 2012
Period 1Q12
Actual vs. Expectations
1Q12 net profit of RM1.3m came in below ours and streets estimates, making up 5% and 4% of our FY12E net profit and that of the consensus respectively, due to delays in LRT extension works.
Dividends No dividend was declared during the quarter.
Key Result Highlights
YoY, 1Q12 revenue reduced by 6% for the same reason as mentioned above.
QoQ, 1Q12 pretax was back in the black at RM3.9m compared to last quarter's loss of RM0.2m. Its property division saw margin expansion to 46% from 4Q11's 9%.
Outlook TRC's order book currently stands at c.RM1.8b which provides 3-years earnings visibility.
Management guides that the LRT extension works should pick-up pace in 2H12 as the Development Orders have been obtained in April 2012.
Based on our channel checks, we believe that TRC will be extending its presence into East Malaysia as they have been actively bidding for dredging works in Samalaju.
Change to Forecasts
Lowering FY12E estimates by 33% to RM18.2m, as we factor further delays on LRT extension works. But we maintain FY13E earnings at RM44.2m as chain-effect of the earnings delay will materialize in FY14E. We expect LRT project contributions to commence in 4Q12.
Rating Maintain OUTPEFORM
TP of RM0.82 implies 28% upside to current share price which will be buoyed by positive construction news flow and new contracts.
Valuation We lowered our Target price to RM0.82 from RM0.94 previously based on unchanged 12x PER on average FY12-13E EPS of 6.9sen.
Risks Further delays in LRT/MRT projects.
Source: Kenanga
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