Stock Name: TRC
Company Name: TRC SYNERGY BHD
Company Name: TRC SYNERGY BHD
| Research House: OSK | Price Call: BUY | Target Price: 0.79 |
TRC's FY11 topline and core earnings came in at RM391.3m and RM13.5m respectively.At a glance, the numbers seem to be in line with our estimate at 96.8% of thefull year forecast, but its 4QFY11 numbers were distorted by positive taxation.At the pretax level, its FY11 earnings would have fallen short of both streetand our forecasts at 68.3% and 81.6% of the full-year estimates respectively.That said, we are keeping our bullish view on the company as TRC is a strongcontender for the elevated works for the KV MRT SBK line. Hence, maintainTRADING BUY, at a slightly lower FV of RM0.79.
Disappointing 4QFY11. TRC's FY11 revenue amounted to RM391.3m(+3.9% y-o-y) while earnings stood at RM13.5m (-16.4% y-o-y). At a glance, thenumbers seem to be in line with our estimate, at 96.8% of our full year forecast. Nonetheless, its 4QFY11 numbers were distorted by a positive taxation amounting to RM2.8m.Excluding this, its FY11 pretax earnings would have fallen short of both streetand our forecasts at 68.3% and 81.6% of the full year estimatesrespectively. We attribute this to theslower-thanexpected progress at its LRT extension project, which we understandran into a snag due to delays in obtaining approvals from certainmunicipalities, as well as additional costs incurred during the defectliability period for some of its previous projects. By the same token, the4QFY11 numbers were generally weaker q-o-q and y-o-y, with an EBIT loss of RM3.3m.However, its 4QFY11 net earnings stood at RM2.6m, helped by positive taxation ofRM2.8m recognized during the quarter.
MRT play. Despitethe disappointing results, we continue to believe that TRC is a strong contenderfor the elevated works of the KV MRT SBK line as it is the only contractor thathas been prequalified for all categories in both the open and bumiputra portions. We estimate that thecompany's outstanding orderbook was worth RM1.5bn as of Dec 2011, with areplenishment target of RM500m p.a. for both FY12 and FY13.
TRADING BUY. No major changes to our core assumptions for now. Nonetheless, our FY12and FY13 core earnings forecasts are revised marginally downwards by 2.2% and 6.0% to RM25.2m and RM33.4mrespectively for book-keeping purposes following the company's full-year results. Maintain TRADING BUY, with our FV nowrevised lower to RM0.79, based on ourSOP valuation based on an unchanged 12x FY12 PER to its constructionearnings.
Source: OSK188
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