Visa” for Sarawak
TRC is the only Peninsular based contractor with a UPK Class A license for Sarawak, enabling it to bid for state funded jobs. It has thus far secured RM800m worth of jobs there, which has traditionally been hard for Peninsular contractors to penetrate.
Its recent Sarawak contract is the Samalaju Port interim facilities (RM194m) which must be completed in a tight period of 9 months. The swift completion of this job would place TRC in a polar position to bag some of the packages for the main port (RM1.8bn).
Strong property sales
TRC’s ongoing property development is the Ukay Tropika (RM90m GDV) in Ulu Klang, Ampang which comprises 3-storey terrace houses in a gated community. Sales have been strong since its launch last Dec with 80% taken up. The unsold portion mainly comprises of the Bumi-allocated lots.
Initiate with BUY
Following 3 consecutive years of earnings decline, we believe TRC is now at an inflection point. Anchored by its sizable orderbook following strong job wins, we project FY12-14 earnings to grow at an aggressive CAGR of 55.8%.
Our fully diluted SOP-based TP of RM0.84 implies FY12 P/E of 21.3x but is drastically reduced to 9.9x and 8.1x for FY13-14 once earnings kick in.
With 28.8% upside to our TP, we initiate coverage on TRC with a BUY rating.
Smartbiz: Based on charts, price of this counter is trending downwards but this favorable report might give it a temporary boost to test its overhead resistance at 0.645. Due to the weak market, price might retreat again to test the support at 0.62. By then, opportunity emerges for bottom fishing.
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