We initiate coverage on TRC Synergy Berhad with a BUY recommendation. TRC is a reputable construction company with a solid track record. We derive our target price of RM0.38 based on 8x CY23 earnings. This represents a potential total return of 31.4% (including a 4.7% estimated dividend yield).

Investment Merits

1. An established contractor with a proven track record;

2. Expect decent earnings growth from property development;

3. The normalisation of contribution from the hotel investment in Australia; and

4. A solid balance sheet with a decent dividend yield.

Earnings Forecast

We assign a target PE multiple of 8x to TRC and arrive at a target price of RM0.38. This is after considering the group has: i) highly experienced key management team with a proven track record in the construction industry; ii) decent earnings growth from property development; iii) a healthy balance sheet with a net cash position of RM153.8mn or 32.0sen/share as of end-June 2022, and iv) decent dividend yield of about 4.7% and 5.0% projected for FY23 and FY24. BUY.

Source: TA Research - 30 Sept 2022