The Singapore International Arbitration Centre has ordered the Brunei  Economic Development Board (BEDB) to pay 18.7mn Brunei dollars  (RM60.2mn) to Trans Resources Corporation Sdn Bhd, a wholly-owned  subsidiary of TRC Bhd (TRC), over a dispute pertaining to a contract to  modernise the Brunei International Airport Terminal. BEDB is required to pay  the total sum within 14 days from Jan 16, 2023.

Recap, TRC initiated the arbitration proceedings against BEDB over the dispute  pertaining to the airport terminal works contract in January 2020. The group  claimed for the payment of amounts wrongfully deducted by BEDB from the  sums due to TRC and compensation for losses suffered by TRC as a result of  certain acts and/or omissions of BEDB.

Our View

We are positive about the news as the prolonged dispute with BEDB has finally  ended, while TRC is entitled to receive RM60.2mn or 12.5sen/share as  compensation, which will help the group further strengthen its capital position.  If we assume the payment receives within the timeline, the net cash of TRC is  estimated to improve from RM140.2mn as of end-September 2022 to  RM200.4mn.

Impact

After factoring in higher interest income, we raise FY23 and FY24 earnings  forecasts by 4.6% and 4.0%.

Valuation

Upon revising the earnings forecasts and rolling forward our valuation base year  to CY24, we tweaked the target price higher from RM0.38 to RM0.43, based  on unchanged 8x CY24 earnings. Maintain a Buy call on the stock.

Source: TA Research - 31 Jan 2023