HLIB Research said TRC’s unbilled orderbook stands at RM400mil translating to a thin 0.7 times cover.
PETALING JAYA: TRC Synergy Bhd
’s orderbook, which stands at around RM400mil, could stay in a downward trajectory in the near term after losing out on bids for the Kuching Urban Transportation System (KUTS)
“We gather that post-meeting, TRC has lost out on both its KUTS bids. This would reduce TRC’s current outstanding tenders to an estimated RM3.8bil,” Hong Leong Investment Bank (HLIB) Research said in a note.
The research house said TRC had major tenders for the Mass Rapid Transit 3 (MRT3) CMC301 package and two packages for KUTS with an estimated value of RM3bil and RM1.2bil respectively.
The company’s bids for the KUTS project are for Package 1 (Blue Line) from Rembus to Stutong and Rembus depot.
HLIB Research said TRC’s unbilled orderbook stands at RM400mil translating to a thin 0.7 times cover.
This mostly comprises its Putrajaya 8MD3 project, mint modernisation project and the remainder from the unrecognised portion of the LRT3 and PBH Sarawak projects.
“Jobs will run to the third quarter of 2024 (3Q24). Finalisation of accounts in financial year 2024 (FY24) could still deliver reasonable margins though engineering and construction revenue is expected to come down,” it added.
It said the remaining tenders of RM700mil are likely to be road projects in Sabah and Sarawak.
The company is also qualified to tender for flood mitigation jobs announced in Budget 2024.
TRC is also expected to see partial reinstatement of the reduced value in its contract for LRT3. Some previously cancelled portions of LRT3 were reinstated in the 2024 budget.
The reinstated value of RM4.7bil is inclusive of construction of five new stations, acquisition of three sets of three-car trains, upgrading of the train depot, project-management expenses, legal fees, land acquisition costs, insurance premiums and fees due to project delays.
“During the LRT3 downsizing, TRC’s depot contract was reduced from RM760.6mil to RM536.8mil. We reckon there is a possibility of partial reinstatement of this reduced value unless the turnkey decides to go with a different contractor,” it added.
HLIB Research noted TRC’s property segment could be subdued until phase two of its Ara Sentral development is launched in 1Q25.
“The launch of phase two carrying a gross development value of RM500mil-RM600mil will now take place in 1Q25. TRC intends to complete substructure works before launch to mitigate liquidated ascertained damages risks from any potential construction hiccups.
“Note that constructing this project in-house does not translate to earnings impact until sales are generated in FY25,” the research house added.
Meanwhile, TRC’s hotel segment is expected to contribute marginally to the bottom line next year. Occupancy rates remain at sub-50%, translating to operational breakeven levels. Positive bottom-line contribution would require occupancy rates closer to 75% to 80%.
The brokerage firm maintained its “hold” call on the stock with an unchanged target price of 38 sen.
