Friday, 1 March 2013

TRC Synergy - FY12 results within expectations

Period  4QFY12/12MFY12

Actual vs. Expectations  TRC’s FY12 earnings of RM10.2m came in within ours but were below the street’s estimates, making up 100% and 71% of our net profit and that of the consensus respectively.

Dividends  No dividend was declared during the quarter.

Key Result Highlights  QoQ, the 4Q12 earnings was down 16% from RM5.0m to RM4.2m despite a 25% growth in the revenue, mainly due to a 2.2ppt fall in its construction pretax margin from 5.0% to 2.8%.

 YoY, the 4Q12 net profit grew 65% to RM4.2m from RM2.6m, underpinned by a strong revenue growth of 101%. The strong revenue growth was mainly due to a higher recognition and the commencement of several major projects, i.e. the LRT extension line, MRT station work packages, MRT depot work packages and Samalaju Port dredging works.

 For the full year, the net earnings were down by 24% to RM10.2m despite the 62% growth in the pretax profit to RM24.1m from RM14.8m due mainly to a higher effective tax rate of 57.7%. The higher tax rate was due to the underprovision of tax in the prior years. However, we expect its tax rate to normalise back to 25% going forward.

Outlook  TRC’s order book currently stands at c.RM2.0b for the next three years. To recap, TRC was awarded a RM170m road work package in Sarawak at the beginning of the year and we expect TRC to continue to bid for contracts in Sarawak and to also expand its property development business there.

Change to Forecasts  No changes to our forecasts.

Rating  Maintain MARKET PERFORM

 We are maintaining our MARKET PERFORM rating on the stock at this juncture given risk/uncertainty arising from the upcoming General Election.

Valuation  We are keeping our Target Price of RM0.63 based on an unchanged 8.0x Fwd PER on its FY13E EPS of 7.9 sen.

Risks  Further delays in the LRT/MRT projects.

Source: Kenanga

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