2014年6月20日星期五

TRC SYNERGY BERHAD - Ara Damansara Mixed Development in Q4


Author: PublicInvest   |   Publish date: Fri, 20 Jun 10:34

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

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