HLG: 28 May 2008 TRC Synergy - No surprises 1Q08 results
TRC Synergy Berhad HOLD
Price target RM1.92
Share price at 27 May RM1.80
Investment summary
1Q08 net profit rose 84% YoY, in-line with our forecast but 17% ahead of consensus. We are neutral on TRC because: (1) RM1bn in unbilled orderbook will sustain earnings for the next couple of years. YTD winnings have been RM399m; (2) near term political risk affecting government pump-priming prospects; (3) FY08E FD PE of 8x is a 50% discount to bigger peers. We are negative on the Malaysian construction sector: (1) recent sharp political changes could lead to a slow-down in government job-flow; (2) construction valuations remain expensive relative to the broader market, despite a peakish macro environment; (3) in
most cases, overseas jobs cannot compensate for local govt jobs in terms of profitability.
Buy on dips
Despite strong 1Q08 results and RM399m jobs secured YTD, we are neutral on TRC: (1) TRC trades at a FY08E FD PE of 8x, a 40-50% discount to big-cap construction names; (2) near-term political uncertainty affecting government pump priming; (3) 26% stake in PetroBru enhances LT order book visibility.
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Showing posts with label TRC Synergy. Show all posts
Showing posts with label TRC Synergy. Show all posts
Saturday, 21 June 2008
Tuesday, 15 April 2008
HLG: 9 April 2008 TRC Synergy Berhad - Another major contract win
TRC Synergy Berhad BUY
Price target RM2.50
Share price at 8 Apr RM1.75
Investment summary
Overnight, TRC announced a RM197m construction award from the government. This is within our forecast, and re-affirms our bullish view on TRC: (1) 23% EPS CAGR over FY07-09E, driven by the recent doubling of its win-rate from RM200-300m pa to RM600m; (2) FY08E FD PE of 8x is a 50% discount to bigger peers; (3) high visibility of earnings as current unbilled orderbook of RM924m forms 65% of our FY08-09E revenue forecast.
We are negative on the Malaysian construction sector: (1) recent sharp political changes could lead to a slow-down in government job-flow; (2) construction valuations remain expensive relative to the broader market, despite a peakish macro environment; (3) in most cases, overseas jobs cannot compensate for local govt jobs in terms of profitability.
Taking the long view
Share price has fallen -31% YTD: (1) Mkt sell-down has scared investors away from illiquid small caps. (2) Heightened political risk is affecting sentiment on construction stocks. Neither is likely to change in the next 6 mths. We think TRC is a 2-3 yr punt, given its fundamentals/valuations.
Price target RM2.50
Share price at 8 Apr RM1.75
Investment summary
Overnight, TRC announced a RM197m construction award from the government. This is within our forecast, and re-affirms our bullish view on TRC: (1) 23% EPS CAGR over FY07-09E, driven by the recent doubling of its win-rate from RM200-300m pa to RM600m; (2) FY08E FD PE of 8x is a 50% discount to bigger peers; (3) high visibility of earnings as current unbilled orderbook of RM924m forms 65% of our FY08-09E revenue forecast.
We are negative on the Malaysian construction sector: (1) recent sharp political changes could lead to a slow-down in government job-flow; (2) construction valuations remain expensive relative to the broader market, despite a peakish macro environment; (3) in most cases, overseas jobs cannot compensate for local govt jobs in terms of profitability.
Taking the long view
Share price has fallen -31% YTD: (1) Mkt sell-down has scared investors away from illiquid small caps. (2) Heightened political risk is affecting sentiment on construction stocks. Neither is likely to change in the next 6 mths. We think TRC is a 2-3 yr punt, given its fundamentals/valuations.
Tuesday, 4 March 2008
TRC Synergy - FY07 net profit within expectations
TRC Synergy - FY07 net profit within expectations (Results Note)
Price: RM2.03
Target Price: RM4.42
Recommendation: BUY
· FY07 net profit of RM29.4m was within our estimates of RM30.6m bring 3.9%. FY07 net profit was largely driven by new contracts secured in early 2007 which are being executed and progress billings. Net profit for 4Q07 typically the strongest quarter compensated for the weaker 3Q07 net profit. It is typical that construction contracts have volatile quarterly results given the different construction lifecycle of each project at any one point in time.
· FY07 net profit was 180% higher YOY as a result resurgence in contracts secured in late 2006 early 2007 which are currently under construction namely, Sepanggar Naval Submarine base, Kuala Trengganu (KT) airport expansion and Dang Wangi police station.
· YOY 4Q07 net profit of RM11.5m was 13x higher given that in 4Q06 netrp ofit of RM0.5m as most of the key projects have not started. In 4Q06. QoQ despite lower turnover of 4%, net profit was sharply higher at 7.4m from 5.4m. This largely due to improved economies of scale, prudent raw material management which compensated for the sharp increases in basic building materials.
· We are maintaining FY08 and FY09 forecast of RM45.9m and RM43.5m respectively. TRC is close to securing the letter of award for KT airport expansion phase 2 and University KL. Together, the projects would add an estimate RM400m to its already sizeable unbilled order book of RM727m making it a total of RM1.1b.
· Maintain BUY with revised target price of RM4.42 (RM4.37) based on FY08 Fully Diluted EPS of 29.5 sen using the average PER of 12x for smaller construction companies. The share is currently trading at attractive FY08E and FY09E PER of 7x respectively.
KENANGA INVESTMENT BANK BERHAD (15678-H)
Research Department
Price: RM2.03
Target Price: RM4.42
Recommendation: BUY
· FY07 net profit of RM29.4m was within our estimates of RM30.6m bring 3.9%. FY07 net profit was largely driven by new contracts secured in early 2007 which are being executed and progress billings. Net profit for 4Q07 typically the strongest quarter compensated for the weaker 3Q07 net profit. It is typical that construction contracts have volatile quarterly results given the different construction lifecycle of each project at any one point in time.
· FY07 net profit was 180% higher YOY as a result resurgence in contracts secured in late 2006 early 2007 which are currently under construction namely, Sepanggar Naval Submarine base, Kuala Trengganu (KT) airport expansion and Dang Wangi police station.
· YOY 4Q07 net profit of RM11.5m was 13x higher given that in 4Q06 netrp ofit of RM0.5m as most of the key projects have not started. In 4Q06. QoQ despite lower turnover of 4%, net profit was sharply higher at 7.4m from 5.4m. This largely due to improved economies of scale, prudent raw material management which compensated for the sharp increases in basic building materials.
· We are maintaining FY08 and FY09 forecast of RM45.9m and RM43.5m respectively. TRC is close to securing the letter of award for KT airport expansion phase 2 and University KL. Together, the projects would add an estimate RM400m to its already sizeable unbilled order book of RM727m making it a total of RM1.1b.
· Maintain BUY with revised target price of RM4.42 (RM4.37) based on FY08 Fully Diluted EPS of 29.5 sen using the average PER of 12x for smaller construction companies. The share is currently trading at attractive FY08E and FY09E PER of 7x respectively.
KENANGA INVESTMENT BANK BERHAD (15678-H)
Research Department
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