Following our recent meet-up with TRC, we remain cautiously optimistic  about the group's outlook. The group is currently backed by an  outstanding construction order book of around RM0.7bn, translating to  about 1.1xFY22 revenue. The group is still eying to strike a jackpot from  the MRT3 project. The current tender book stands at around RM3.8bn.  On the other hand, the group will proceed with phase 2 of the Ara Sentral  Project, which carries an estimated gross development value of  RM500.0mn. Meanwhile, management guided that the property  business in Australia is expected to remain lacklustre. Nevertheless, the  hotel business in Australia is on track to recovery. Pertaining to the  arbitration award, TRC recently received the full payment from Brunei  Economic Development Board (BEDB). Overall, we maintain a Buy call  with an unchanged target price of RM0.43.

Still Eying for the MRT3 Project

Based on management's guidance, the current outstanding construction order  book is around RM0.7bn, translating to about 1.1xFY22 revenue. Management  guided that the group did not secure any substantial jobs last year as the group  was not aggressively bidding for jobs amid a labour shortage and escalated  materials cost environment. Currently, the group is eying to win a jackpot from  the MRT3 project. According to the media, TRC has bid RM3.1bn for work  package CMC301, which is mainly involved in designing, constructing and  completing a viaduct guideway, elevated stations, depot and other associated  works from Pandan to Jalan Cheras in Kuala Lumpur. Due to its extensive track  record in railway and related works, TRC has a good chance of winning the job.  If the group fails to win the bid to become the main civil contractor, we believe  TRC still has a decent chance to become the work package contractor. The  current tender book stands at around RM3.8bn.

Intends to Proceed with Phase 2 of Ara Sentral

Management guided that the group will proceed with phase 2 of the Ara Sentral  Project in Ara Damansara, Selangor. Phase 2 mainly consists of retail units and  three blocks of apartments with an estimated gross development value of  RM500.0mn. The group is targeting to launch next year. Meanwhile,  management also guided that the property business in Australia is expected to  remain lacklustre amid a rising interest rate environment. On the other hand,  the hotel business in Australia is also on track to recovery. The occupancy and  average daily rate have started to improve following the re-opening of the  international border.

Received the Full Payment from BEDB

Recap, TRC initiated the arbitration proceedings against BEDB over the airport  terminal works contract dispute in January 2020. TRC had won the arbitration,  and BEDB was required to pay 18.7mn Brunei dollars (RM60.2mn) to the group.  After including the interest and legal fees, the final settlement amount was  around RM70.0mn. According to management, BEDB had recently made the  payment to the group. Following the payment, the net cash of TRC is estimated  to improve from RM115.4mn (24.0sen/share) as of 4QFY22 to RM185.4mn  (38.5sen/share).

Forecast

Maintain our FY23 to FY25 earnings forecasts.

Valuation

No change to our target price of RM0.43, based on unchanged 8x CY24  earnings. Maintain Buy on TRC.

Source: TA Research - 4 Apr 2023