Maintain Neutral with unchanged target price (TP) of RM0.39
|TRC Synergy Bhd|
TRC Synergy (TRC) revealed that it might potentially nail more jobs this year, potentially from the MRT2 and LRT3 rail links, Pan Borneo and other highways such as SUKE and DASH. Granted, the competition will be stiff with most contractors bidding for the same jobs. However, we believe the Group’s experience in working on the earlier phases of LRT/MRT could give it an added advantage. FY15 was quiet in terms of job replenishments with only RM176m worth secured. Separately, it announced that it has secured a contract worth RM88m yesterday for a sub-contract to develop the new Kuala Lumpur Air Traffic Control Centre at KLIA and other locations, which would increase its outstanding orderbook to RM1.2bn. As for property, its Ara Damansara mixed development project is confirmed to be deferred to end-2016, with the development order expected by 3QCY16. Elsewhere, its property development project worth RM293m secured back in December last year could be launched by 2H2016. Maintain Neutral and unchanged TP of RM0.39 pegged at c.8x FY17F EPS.
- RM1.2bn Outstanding Orderbook. With the new job win, the Group’s current outstanding orderbook is c.RM1.2bn. Main on-going jobs are the Kelana Jaya LRT extension project, MRT1, and KL Eco City building contracts. We understand that its tender book, among others include the Pan Borneo Highway, LRT3, MRT2 and other highways such as SUKE and DASH. As for construction progress of its jobs, we understand that the LRT and MRT jobs are mostly completed with certificate of practical completion (CPC) pending for its LRT project. To recap, the LRT was contractually supposed to have been completed by July 2013 but subsequently revised to May 2015 due to site issues. Given TRC’s working relationship with Prasarana (client for LRT) and Gamuda-MMC (client for MRT 1), we believe it could potentially clinch a few big jobs this year. However, we rather err on the side of caution by assuming job replenishment rate of c.RM500m p.a. for now even though each package could easily exceed RM500m already. Its previous LRT job was worth RM950m, while the MRT 1’s combined contract value is already c.RM743m.
- Property. True to our earlier suspicion, the Group’s Ara Damansara project will indeed be deferred, given current weak market conditions. We understand that it will only unveil the project earliest by 4QCY16. The initial launch date was originally slated for end-2015. The mixed development in Ara Damansara has a combined GDV in excess of RM1bn with first phase estimated to be c.RM300m. As indicated earlier, this project will be competitively priced (at c.RM600psf) and given its proximity to the LRT station; we believe the project should be well received. All told, our FY16F-17F are adjusted down marginally by -7%/-1% after some revenue billing adjustments.