High material costs to affect TRC’s earnings

Business Times

PUBLIC Investment Bank Bhd (PublicInvest) expects TRC Synergy Bhd’s earnings to continue to be slow due to margin compression from higher material costs and cost overrun for some ongoing projects.

“TRC announced that its wholly-owned subsidiary, Trans Resources Corporation Sdn Bhd, had accepted the offer from the Public Works Department Malaysia for the refurbishment and upgrading works for Parliament House (Phase 2B).

“The contract sum is totalling RM191 million, but no details were given on the construction period. This came as no surprise as the group had indicated earlier that it might clinch another job soon in our meeting with the management back in June.

“Together with the RM414 million building jobs secured back in April, total outstanding order book will now stand at RM1.76 billion from RM1.56 billion previously,” it said in a note.

“TRC’s new job win has already reached RM606 million, which is way better that the financial year 2013’s job replenishment of RM170 million and higher than our expectations of RM300 million of new jobs per annum,” PublicInvest said.

“TRC’s earnings might still be under pressure due to higher material costs and cost overruns that could affect margins longer than expected. A recent accident at its LRT site (for the third time) is also worrying. We maintain ‘neutral’ call and and target price of 54 sen.”

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