Brunei, East Malaysia good markets for TRC Synergy

KUCHING: Construction player TRC Synergy Bhd (TRC Synergy) will do well to diversify into other pockets of opportunities in Sarawak such as the Pan Borneo Highway Sarawak extension and Sabah-Sarawak Link Road (SSLR).

This comes as analysts with Hong Leong Investment Bank Bhd (HLIB Research) noted that the firm remains highly levered to construction projects like the MRT3 project rollout with a worst case target of RM600 million to RM800 million contract wins from the project.

To note, TRC’s current unbilled construction orderbook stands at RM700 million translating to 1.2 times of its construction revenue in financial year 2022 (FY22).

“Contracts wins in FY22 were marginal and did not meet announcement threshold,” highlighted HLIB Research in a note yesterday.

“The last announced project was RM43 million maintenance jetty project in Sabah from a recurring customer in FY21. Approximately 50 per cent of its unbilled orderbook is due for completion in FY23.

“The firm saw that TRC Synergy’s tenderbook stands at RM3.8 bilion where it estimated about RM3 billion to be the MRT3 CMC301 tender with a 100 per cent stake.

“The remainder could consist of open tender road projects where we learnt competition is intense.”

HLIB Research now expect MRT3 Tier 1 awards in 2H23 pending completion of realignment studies and potential further cost cuts.

“MRT3 aside, there are opportunities in Sarawak for PBH Sarawak extension, SSLR as well as multiple “sick” projects estimated at around RM50 million each.

“Apart from the aforementioned job in Sabah, the company generally shies away from the state due to operational risks.”

As highlighted previously, TRC obtained the final award from Singapore International Arbitration Centre against BEDB in relation to the Brunei International Airport project.

HLIB Research gathered that the amount owed including interest is ‘RM70 million plus’, not too dissimilar to the research firm’s earlier estimate of RM75 million.

“Nevertheless, the debtor has asked for an extension to the payment deadline to mid-March 2023 from early February 2023.

“While management has not ruled out the possibility of special divvy, we believe this is contingent on its MRT3 bid and financing needs for Phase 2 of Ara Sentral.

“If funds are received as scheduled, there will be an impairment reversal of RM8 million in 1QFY23.”