Journey to Wealth
TRC Synergy - OUTPERFORM - 12 JUNE 2012
News Yesterday, Bintulu Port Holdings Bhd announced that it had issued a letter of acceptance to TRC's subsidiary for the construction and completion of Samalaju Port development project at Samalaju, Bintulu Sarawak worth RM194m.
Comments The announcement came in within our expectations, making up 64% of our assumed FY12E orderbook replenishment of RM300m.
The work package comes 2 parts, i.e. section A and section B, which would take up to 9 and 12 months, respectively. The scope of works includes construction of two wharves and dredging works.
No announcement was made by TRC. At this juncture, management is scrutinising formal documentations before making an official announcement which will be likely within the week.
We expect the project to deliver about 5% operating margin, which is in line with its previous track record.
Outlook Its outstanding order book currently stands at c. RM2.0b (including Samalaju and KVMRT depot contract), which will provide up to FY15E earnings visibility.
Earnings catalysts will be TRC securing an additional contract of >RM100m in FY12E.
Forecast No changes to our FY12E and FY13E earnings.
Rating MAINTAIN OUTPERFORM
An attractive upside of 31% to our Target Price of RM0.82.
Valuation We maintain our target price of RM0.82 based on unchanged 12x PER on the average FY12-13E EPS of 6.9sen.
Risks Delays in construction projects.
Price escalation in raw materials and labour costs.
Source: Kenanga
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