HwangDBS raises TRC to buy with higher target price (ext: Edge)

HwangDBS Vickers Research is upgrading TRC Synergy Bhd to a buy at RM1.22 with a higher price target of RM2.05 (previously RM1.35) due to its solid order book, potential jobs in East Malaysia and Brunei, as well as its strong cash position.
HwangDBS said TRC’s current order book of RM645 million remained resilient and is 100%-backed by the government, where average margins for 2008 were 9% and expected to be at 8% for 1Q09. It is also bidding for a massive refinery project in Brunei, led by PetroBru in which TRC has a 26% stake.  
“We expect the market to rerate TRC as more clarity emerges on the PetroBru-led Brunei refinery project, estimated to cost US$4 billion (RM14.28 billion). The likelihood of this project taking off is increasingly positive with the consultant giving the thumbs up and current stable oil prices. A significant milestone will be an approval by the Brunei government,” it added.
 “The stock has been a laggard compared to its peers, down 12% year to date. We upgrade our rating on TRC to buy with a price target of RM2.05, based on 10 times CY10 FD EPS (fully diluted earnings per share). This represents a 40% discount to the average CY10 PE (price earnings) of its larger cap peers of 16.7 times” said the research house.