THE BUZZ
TRC Synergy has secured a RM194m contract from Bintulu Port for the construction of the proposed Samalaju Port Development Project at Samalaju in Bintulu. Works are expected to be completed within a year.
OUR TAKE
Above expectations. We deem the announcement a positive surprise as we had previously assumed a FY12 orderbook replenishment of RM500m for TRC. Including this job, TRC would have secured RM689m worth of new jobs YTD. Hence, we are revisiting our model and tweaking up our new jobs target to RM700m for FY12, although we are leaving our RM500m FY13 target unchanged. More importantly, we believe this indicates that the momentum is indeed picking up at the RM25bn Sarawak Corridor of Renewable Energy, from which we expect more contracts in 2H12.
A better 2HFY12 for sure. With this RM194m contract in the bag, TRC’s outstanding orderbook now stands at RM1.9bn, which should last the company well into 1H14. Although its 1HFY12 earnings are likely to disappoint due to the slower-than-expected progress at its LRT extension project owing to approval delays in the part of the approval by the authorities, we expect TRC’s earnings to normalize in 2HFY12, having secured all the required approvals for works to commence in April. Following our orderbook replenishment revision, our FY12 and FY13 earnings forecasts are upgraded by 10.3% and 15.3% respectively to RM22.9m and RM38.5m.
TRADING BUY. Considering TRC’s RM1.9bn-strong orderbook and the days of earnings disappointment likely to be behind us, as well as the required approvals having been secured for works to proceed on the LRT extension project, we maintain our TRADING BUY call on the stock. Following our earnings revision, our FV now stands at RM0.79, based on an unchanged 14x FY12 PER on the company’s construction earnings.
Source: OSK
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