TRC Synergy Berhad HOLD
Price target RM1.60
Share price at 28 Aug RM1.35
Investment summary
H108 net profit rose +35% yoy and was in-line with forecasts/consensus. Despite share price falling -46% YTD, we remain neutral on TRC: (1) Job-flow will slowdown appreciably in H208, after the sharp pre-election run-up in H108. (2) Current political landscape does not favor Bumi contractors as opposed to its genuine apolitical peer WCT. We are positive on the Malaysian construction sector and believe government job-flow may pick up: (1) pump-priming is an obvious and politically easy policy action in addressing the on-going external macro-economic slump; (2) recent building material market liberalization and fiscal-boosting fuel price hikes hint at this direction. We prefer playing the pump-priming story via liquid big-cap contractors (eg. Gamuda, IJM).
Quiet newsflow
Positive earnings growth and decent pace of recent job-flow, but we expect things to quiet down in H208. Near-term job-flow hinges on its downstream oil venture in Brunei, and clarity on this project will only emerge in Q109.
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Friday 29 August 2008
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