Period 2Q12/1H12
Actual vs.
Expectations
The 1H12 net profit of RM1.0m came in below ours
and the street’s estimates, making up 6.3% and 4.5% of our FY12E net profit and
that of the consensus respectively.
Dividends
No dividend was declared during the
quarter.
Key Result Highlights
On a YoY and QoQ basis, TRC’s net loss of RM0.4m
was predominantly due severe margin contraction to 1.4% (-1.8ppt YoY; -5.6ppt
QoQ) as a result of higher operating costs (administration costs) incurred due
to the delay on its LRT extension project and lower contribution from its
property development in Australia. In addition, there was a higher effective
tax rate due to the underprovision of taxation in previous years. However, the
loss was an improvement of 195% from the loss of RM2.3m in 1Q12 due to a profit
of RM2.2m at its investment division.
Outlook TRC’s order book currently stands at c.RM2.2b,
which provides a 3-year earnings visibility to the group and will keep it busy
throughout the year.
As per management guidance, the LRT extension works
should pick up pace in 2H12 as the Development Orders have been obtained in
Apr-12.
Change to Forecasts
We have tweaked our FY12-FY13E lower by 35% and
19% to RM10.1m and RM35.8m respectively as we factored in further delays in its
LRT extension contract.
Rating
Maintain OUTPEFORM
We maintain an OUTPERFORM on the stock due to
the attractive share price upside of 13% to our TP of RM0.71 and given the
strong earnings visibility of the group.
Valuation We have lowered our Target Price to RM0.71 based
on 9.0x Fwd PER on lower FY13E EPS of 7.9 sen (previously RM0.73 based on 9.0x
Fwd PER to the weighted average FY13E EPS of 8.1 sen). We will further lower
our Target Price if there anymore delays from its LRT project.
Risks Further delays in the LRT/MRT projects.
Source: Kenanga
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