KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) has revised its forecasts for TRC Synergy Bhd's core profit after tax and minority interest (PATAMI) for the financial years 2025 and 2026 (FY25/FY26), reducing them by 7.6 per cent and 23.2 per cent, respectively.
These revisions are a result of delays in the expected rollout of major tender opportunities and the postponement of property recognition to FY26.
Consequently, HLIB Research has downgraded TRC Synergy to 'Hold' from 'Buy' with a lower target price of 47 sen from 55 sen post-adjusting for earnings and cash buffers.
"In our view, the company's net cash per share previously served as a floor valuation indicator to us.
"However, with projected dwindling of this amount in future quarters, we are cutting assumed cash buffers in our sum of the parts (SOP) valuation," it said.
HLIB Research has adjusted downwards financial year 2024 (FY24) construction replenishment assumptions to RM1.0 billion from RM1.5 billion due to delays in government infra timelines.
TRC Synergy's unbilled order book is currently at RM1.0 billion, representing a 2.1 times cover, with approximately 74 percent of projects secured in FY24 year-to-date.
"Existing tenders include Penang airport packages. Potential near-term sizable tender opportunities could come from Penang LRT subcontracts in the first half of calendar year 2025 (1HCY25).
"Based on the latest guidance, MRT Corp Sdn Bhd expects MRT3 construction to commence only in calendar year 2026 (CY26).
"Including delays in our expected timeline for Penang LRT, we see downside risks to our RM1.5 billion replenishment assumptions for FY24," it said.
TRC Synergy also announced that the launch of its Ara Sentral Phase 2 development, with a gross development value (GDV) of RM500 million, is now expected to be delayed to the second quarter of calendar year 2026 (2QCY26) from the previously guided first quarter of calendar year 2025 (1QCY25).
However, the timeline for starting construction remains unchanged, set for the fourth quarter of calendar year 2024 (4QCY24), with completion up to the podium stage before the launch to reduce risks related to liquidated ascertained damages (LAD).
"We anticipate sequential declines in its net cash position as a result. We are adjusting downward recognition in FY25 on account of launch delays," it adds.