We met up with the Management recently, which revealed that it might
clinch another job in the next 1-2 months, adding to the RM414m building
jobs secured back in April. As at last quarter, the total outstanding
orderbook is RM1.56bn, which will underpin the Group‟s earnings for the
next 2-3 years. We understand that earnings will continue to be slow due
to margin compression from higher material costs and cost over-run for
some of the on-going projects but could pick up with more earnings
coming from its property projects. Separately, the much anticipated Ara
Damansara mixed development is now expected to be unveiled by end-2014
from 1H2014 due to delay in approvals. All told, earnings will still be
subdued in this FY, but we believe earnings from property especially the
Ara Damansare project could improve both the Group‟s margins and
earnings in the next few years.
Construction outstanding orderbook is still healthy at RM1.56bn, with the recent new job i.e.RM414.6m from KL Eco City Sdn Bhd (a subsidiary of SP Setia, the master developer of KL Eco City near MidValley Megamall) to construct the foundation works and superstructure of an office tower. We also understand that TRC is in the running for another building job, which is to refurbish a building in KL, with job value of c.RM200m. The recent provisions for higher material costs and cost over-run demonstrated the difficult working environment of the local construction industry currently, due to resources restrains especially labor and machineries, which caused unexpected rise in construction costs which will squeeze margins for the next few quarters.
Ara Damansara mixed development to be unveiled in Q4. We understand that the Group is now guiding a combined GDV in excess of RM1bn for the 12-acre development. This is much higher than its initial estimate of RM688m and our estimated GDV of RM800m due to higher average selling prices (c.RM700psf). We have earlier assumed average selling price RM600psf, which was comparable to RM600 to RM650 psf of a neighboring project i.e. Eve Suite, 65% efficiency). A recent launch nearby by See Hoy Chan i.e. The Potpourri has been well received (70% sold, RM800 average selling prices).
Maintain Neutral and TP of RM0.54. Granted, TRC is a good proxy to the Klang Valley MRT project and SCORE projects but we believe until there‟s stabilization in the Group‟s earnings, we would prefer to take a conservative stance.
Source: PublicInvest Research - 20 Jun 2014
Construction outstanding orderbook is still healthy at RM1.56bn, with the recent new job i.e.RM414.6m from KL Eco City Sdn Bhd (a subsidiary of SP Setia, the master developer of KL Eco City near MidValley Megamall) to construct the foundation works and superstructure of an office tower. We also understand that TRC is in the running for another building job, which is to refurbish a building in KL, with job value of c.RM200m. The recent provisions for higher material costs and cost over-run demonstrated the difficult working environment of the local construction industry currently, due to resources restrains especially labor and machineries, which caused unexpected rise in construction costs which will squeeze margins for the next few quarters.
Ara Damansara mixed development to be unveiled in Q4. We understand that the Group is now guiding a combined GDV in excess of RM1bn for the 12-acre development. This is much higher than its initial estimate of RM688m and our estimated GDV of RM800m due to higher average selling prices (c.RM700psf). We have earlier assumed average selling price RM600psf, which was comparable to RM600 to RM650 psf of a neighboring project i.e. Eve Suite, 65% efficiency). A recent launch nearby by See Hoy Chan i.e. The Potpourri has been well received (70% sold, RM800 average selling prices).
Maintain Neutral and TP of RM0.54. Granted, TRC is a good proxy to the Klang Valley MRT project and SCORE projects but we believe until there‟s stabilization in the Group‟s earnings, we would prefer to take a conservative stance.
Source: PublicInvest Research - 20 Jun 2014
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