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TRC Synergy - 9M12 results largely inline

kiasutrader
Publish date: Tue, 27 Nov 2012, 10:03 AM
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Period    3Q12 / 9M12

Actual vs.  Expectations  The 9M12 net profit of RM6.0m came in largely inline with ours but below street's estimates, making up 60% and 36% of our FY12E net profit and consensus respectively.   However, we expect that the group would be able to make up to our forecast in 4Q12 given the speedier execution on major projects.

Dividends   No dividend was declared during the quarter. 

Key Result Highlights  YoY,  the 9M12 net profit declined by 46% from RM11m to RM6m despite a 25% increase in the revenue to RM371.6m. This was due to the narrowing net margin recorded of 1.6% from 3.7% previously. The margin was negatively affected by the higher administration costs incurred due to the delay of its LRT extension project in the past quarters coupled with a much higher effective tax rate of 63.1% due to under provisioned taxes in previous years.

 QoQ,  the 3Q12 bottom line improved substantially from a loss of RM0.4m to a net profit of RM5.0m on the back of a 34.5% rise in the revenue. This was driven by the progressing LRT works during the period and contributions from the other ongoing projects like Samalaju Port dredging works. The positive momentum was also attributable to the improvement in the pre-tax margin from 1.2% to 6.9%.

Outlook   TRC's order book currently stands at c.RM2.0b for the next three years. We expect TRC to continue to bid for contracts in Sarawak and to also expand its property development business. 

Change to Forecasts  No changes to our forecasts.

Rating  Maintain MARKET PERFORM
 We are maintaining our MARKET PERFORM rating on the stock at this juncture.

 However, any new projects secured in the nearterm will act as re-rating catalysts.

Valuation    We are keeping our Target Price of RM0.63 based on an unchanged 8.0x Fwd PER on its FY13E EPS of 7.9 sen.

Risks   Further delays in the LRT/MRT projects.

Source: Kenanga
TRC (5054)
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