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 RM0.4bn, translating to about 0.7xFY22 construction revenue. The depletion of the outstanding order book primarily resulted from a lack of new big contract wins over the past two years, as the group was not aggressively bidding for jobs. Following the fact that the prices of construction materials are more manageable now, together with the ease of labour shortage issues, the group has become more aggressive in job tendering. Currently, the group is still eyeing to strike a jackpot worth RM3.1bn from the MRT3 project. Meanwhile, the group will proceed with phase 2 of the Ara Sentral Project. Management guided that the property and hotel businesses in Australia remain lacklustre. Overall, we maintain a Buy call with an unchanged target price of RM0.43.

Getting More Aggressive in Job Tendering

Based on management's guidance, the current outstanding construction order book is around RM0.4bn, translating to about 0.7xFY22 construction revenue. The depletion of the outstanding order book primarily resulted from a lack of new big contract wins over the past two years, as the group was not aggressively bidding for jobs. Given that the prices of construction materials are more manageable now, together with the ease of labour shortage issue, the group has become more aggressive in job tendering.

Currently, the tender book stands at around RM5.0bn, mainly comprised of 1 work package (CMC301) from the MRT3 project and two work packages from the Kuching Urban Transportation System (KUTS) project in Sarawak. For work package CMC301, the estimated contract value is around RM3.1bn, and we believe the actual job award could be as early as next month, given that the tender validity of the MRT3 project is set to expire by the end of December 2023. On the other hand, management revealed that the total estimated contract value for the two work packages from KUTS could be around RM1.2bn, and the tender outcome is expected to be in 1Q2024.

Meanwhile, if the government proceeds with extending the LRT3 and Penang LRT projects, TRC could be one of the primary beneficiaries, thanks to its extensive track record in MRT1, MRT2, and LRT3 projects. Apart from that, the group has some exposure in East Malaysia, especially Sarawak. The group recently completed one package (WPC-05) of the Pan Borneo Highway project in Sarawak. Moving forward, the group intends to focus more on Sarawak, thanks to the local infrastructure boom.

Still Intends to Proceed with Phase 2 of Ara Sentral Project

Management guided that the group will proceed with phase 2 of the Ara Sentral Project in Ara Damansara, Selangor. To recap, the Ara Sentral Project is the main flagship project in the property division. The whole project is divided into 4 phases. Phase 1 had been fully completed. Phase 2 mainly consists of retail units and three blocks of apartments with an estimated GDV of RM500.0mn. The group is targeting to launch on 1Q2025.

Australia Businesses Remain Lacklustre

Management also guided that the property business in Australia is still relatively slow amid a rising interest rate environment. Meanwhile, the hotel business in Australia has yet to see a strong pick-up, with the occupancy rate still below 50%.

Forecast

Maintain our FY23 to FY25 earnings forecasts.

Valuation

The target price is maintained at RM0.43, based on unchanged 8xCY24 earnings. Maintain Buy on TRC. We believe the robust balance sheet with strong net cash of RM320.0mn will help the group to sail through all the nearterm headwinds.

Source: TA Research - 8 Nov 2023