Period  2Q13/1H13

Actual vs. Expectations  TRC Synergy (“TRC”) delivered net earnings of RM12.4m in 1H13 which make up 43% of our and street’s estimates, respectively. With a stronger 2H expected, which is the norm for construction companies, the result is seen as widely in line with expectations.

Dividends  No dividend was declared as expected.

Key Result Highlights  A strong comeback in 1H13. TRC finally rebounded strongly from its weak performance in 1H12 by posting a stronger core net earnings of RM12.4m in 1H13 (vs. RM1.0m; 1H12). TRC’s better performance was predominantly due to higher revenue recognised (+75%) as its LRT extension project is currently in full swing. Based on management’s latest guidance, the LRT extension project progress is currently at 40%, despite encountering some delays due to work-site accidents.

 QoQ, TRC’s core earnings improved 20% to RM6.8m underpinned by a steady revenue growth of 16% coupled with improvements on its operating margin which increased by 2.2ppt from 3.3% to 5.5%. The steady improvement in revenue was due to steady recognition from several major projects i.e. LRT extension, Brunei Airport and Samalaju Port, while the improvement in margins are in tandem with the progress of its projects.

Outlook  TRC’s outstanding order book comfortably stands at c.RM1.8b providing earnings visibility for the next three years.

 Moving forward, we would expect better earnings contributions from its property segment by FY15 underpinned by the joint-development with Prasarana.

Change to Forecasts  No changes to our earnings estimate.

Rating   Maintain OUTPERFORM

 We continue to maintain our OUTPERFORM call as we expect TRC to remains a strong contender in Sarawak and also on the expansion on its property development business, particularly on its rail-plusproperty joint venture project with Prasarana in Ara Damansara.

Valuation  Maintaining our TP at RM0.75 based on an unchanged 9x FY14 PER.

Risks  Further delays in the LRT/MRT projects.

Source: Kenanga