We maintain our BUY call, raise our FY14-15 forecasts by 1%/4% and FV by 1% to MYR0.72. We lift our assumption for TRC’s FY14 contract wins to MYR500m from MYR400m. This follows the award of the MYR415m KL Eco City job yesterday. We like TRC for the advantages it enjoys as a Bumiputera/Sarawak-state-registered contractor, and its highly promising property project in Ara Damansara in Selangor.

• First key contract win in FY14.TRC has secured from KL Eco City a sizeable MYR414.6m contract for earthworks, piling works and the construction of an office block. This is the first key contract TRC has secured in FY14, boosting its outstanding construction orderbook by 26% to MYR2bn (see Figure 1) from MYR1.6bn. Assuming an EBIT margin of 5%, the contract will fetch MYR20.8m EBIT over the contract period ending Mar-Oct 2017. We are positive on the latest development.
• Forecasts. We raise our FY14-15 net profit forecasts by 1%/4% as we now assume contract wins of MYR500m for the company in FY14, up from MYR400m.
• Risks to our view. The risks include: i) contract wins in FY14 falling short of our revised target of MYR500m, ii) rising input costs, and iii) weak demand for its property launches.
• Maintain BUY.The prospects for the construction sector are strong, buoyed by an extended upcycle driven by the MYR73bn Klang Valley MRT project, which will keep players busy until 2021. We also like TRC for the advantages it enjoys as Bumiputera/Sarawak-state-registered contractor, and its highly promising property project on a 12.3-acre site in Ara Damansara, Selangor. Boasting LRT connectivity under the same roof (Ara Damansara Station on the extended Kelana Jaya LRT line), this project – with a GDV of MYR700-800m – is effectively a transitoriented development (TOD). We raise our FV by 1% to MYR0.72 (from MYR0.71), based on 10x revised fully-diluted FY14 EPS of 7.2 sen, in line with our benchmark 1-year forward target P/E of 10-16x for the construction sector.

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SWOT Analysis

Company Profile 
TRC Synergy is a construction company with active projects in Malaysia and Brunei. It is also engaged in property developmentin Malaysia and Australia.

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Source: RHB