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TRC Synergy - Recovery On Track

kiasutrader
Publish date: Fri, 18 Jan 2013, 10:32 AM
THE BUZZ  
 
TRC  announced  that  it  has  secured  a  new  project  from  Jabatan  Kerja  Raya  Sarawak  to construct a public access road from Sangan to Kapit for a contract sum of RM169.9m. This work  package  is  part  of  the  Sarawak  Corridor  of  Renewable  Energy  (SCORE) infrastructure development project. 
 
THE TAKE 
 
Off  to  a  great  start.  This is TRC's first job win in 2013 after  the company secured more than  RM970m  worth  of  jobs  in  2012. We  deem  it  within  our  expectations,  with  our  FY13 orderbook  replenishment  target  remaining  unchanged  at  RM500m.  With  the company's outstanding orderbook  now  totaling  about  RM2.0bn, the jobs  in  hand  may  last  it  well  into 2HFY14, assuming a quarterly burn rate of RM200m-RM250m. More specifically, by award per  se,  the latest contract is TRC's second  one  associated  with  the  SCORE  region.  As such,  we  do  not  discount  the  possibility  of  it  securing  more,  as  management  has  made known its intention to expand its footprint in the said area. 
 
Earnings  likely  to  improve.  As  the  prolonged  delay  at  TRC's RM950m  LRT  extension project has been resolved, we believe the company's stock may likely see an earnings re-rating  over  the  next  few  quarters.  We  are  reaffirming  our  FY13  and  FY14  net  profit forecasts of RM38.9m and RM45.4m respectively. 
 
TRADING  BUY. All in, we are positive on the job wins and believe that TRC's share price may  be  in  for  a  major  re-rating  as  its  earnings  over  the  next  few  quarters  improve substantially  now  that  its  LRT  extension  project  is  gaining  pace.  Given  its  sturdy outstanding  orderbook  of  close  to  RM2bn  and  with  proper  execution,  we  foresee  a  near-term  rebound  in  its  share  price,  which  declined  by  10.9%  in  2012.  Maintain  TRADING BUY, with our FV unchanged at RM0.83, based on a 10x FY13 PE.

Source: OSK
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