TA Securities cuts TRC TP to RM0.605

Business & Markets 2013
Written by Zatil Husna of theedgemalaysia.com
Monday, 29 April 2013 15:30
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KUALA LUMPUR (April 29): TA Securities, though reiterated its ‘buy’ call
on TRC SYNERGY BHD [] (TRC), has a lower target price (TP) of
RM0.605 for the company due the mishap that involved a motorist killed
while another injured.
The group had received a work-stop orders from Department of
Occupational Safety and Health (DOSH) and Public Works Department
(JKR).
“We understand that the stop work order issued by DOSH has been
lifted on April 18, 2013 while JKR is still reviewing the site safety
procedures submitted by TRC before lifting of the stop work order,”
said the research house.
With this, TRC has resumed works on the LRT extension except those
areas under jurisdiction of JKR.
“As the project is covered by insurance, we believe the direct impact on
TRC could be the idling cost of machinery, staff and labour during the
suspension of works and possibly penalty by the authorities if it is found
that negligence is the root cause of the accident,” it said.
The expected completion date is now pushed back to June 2015 from
December 2014 previously.
The research house also said that stricter measures could slow down
the CONSTRUCTION [] pace, prolong construction period and escalate
construction costs.
“As such, in our assumption, we strip off earnings contribution from the remaining works for LRT extension project and cut the
earnings forecasts by 23.9%, 17.4% and 4.8% for FY13, FY14 and FY15 respectively,” it said.
Despite the mishap, as of January 2013, TRC has an order book of RM2 billion, about two thirds of the order book is for rail
related projects.