Review

• Stripping out the exceptional foreign exchange net gain amounting to RM8.2mn, TRC’s 1HFY23 core profit of RM4.2mn came in at 24.3% and 23.8% of ours and consensus’ full-year estimate, respectively. We deem the results to be within expectations as we expect the earnings to be largely back-end loaded, given that the group historically reported stronger 2H.

• YoY, 1HFY23 core profit dropped 30.6% to RM4.2mn, although revenue was 8.6% higher at RM407.5mn. The weaker bottom line was largely attributed to higher administrative and tax expenses. Meanwhile, the revenue growth was mainly contributed by the property development division.

• QoQ, 2QFY23 core profit fell 62.8% to RM1.1mn, despite revenue being 84.0% higher at RM264.0mn. The softer earnings performance was mainly due to higher operating loss incurred by the hotel operation as well as higher administrative expenses.

• Its net cash position increased further from RM241.1mn a quarter ago to RM320.0mn.

Impact

• Maintain our FY23 to FY25 earnings forecasts.

Outlook

• The group’s current outstanding construction order book is around RM0.5bn, translating to about 0.8xFY22 construction revenue. The group is still eyeing the MRT3 project as a near-term boost to its order book. Meanwhile, the group will launch Phase 2 of the Ara Sentral project with an estimated GDV of around RM500.0mn soon.

Valuation

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

Source: TA Research - 1 Sept 2023