PER EPS# C.EPS* P/CF P/NTA ROE

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1 Malaysia PP 7767/09/2012(030475) MARKET DATELINE Corporate Highlights Visit Note TRC Synergy Going All-Out For MRT, Bullish On Brunei RHB Research Institute Sdn Bhd A member of the RHB Banking Group Company No: M 10 November 2011 Share Price : RM0.65 Fair Value : RM0.81 Recom : Outperform (Maintained) Table 1 : Investment Statistics (TRC; Code: 5054) Bloomberg: TRC MK Net FD Net FYE Turnov Profit# EPS# Growth PER EPS# C.EPS* P/CF P/NTA ROE Gearing GDY Dec (RMm) (RMm) (sen) (%) (x) (sen) (sen) (x) (x) (%) (%) (%) (39.5) Cash f Cash f Cash f Cash 3.1 Main Market Listing /Non-Trustee Stock /Syariah-Approved Stock By The SC #Excluding EI * Consensus Based On IBES Going all-out for MRT. TRC is going all-out for work packages of the MRT project. Its tender department has been instructed to prepare and put in bids for all 18 above-ground work packages of the Sg Buloh Kajang (SBK) Line of the Klang Valley MRT project worth a total of RM12-13bn based on our estimate. For elevated civil works, TRC has a significant edge by virtue of the specialised construction equipment it owns, particularly, the RM20m girder launcher and gantry that we estimate can translate to a 2%-pt margin advantage. Bullish on Brunei. TRC is bullish on the construction market in Brunei, given the tremendous room for basic infrastructure spending including roads, housing, hospitals and universities. Already, TRC in Oct 2011 secured a RM319m contract for the modernsation of Brunei International Airport Terminal. Brunei is not a new market to TRC. Apart from eyeing basic infrastructure projects, recall, TRC has been pitching for a multi-billion ringgit crude oil refinery and storage project in Brunei. Issued Capital (m shares) Market Cap (RMm) Daily Trading Vol (m shs) wk Price Range (RM) Major Shareholders: (%) DS Sufri Bin Mohd Zin 37.8 Dato' Leong Kam Heng 9.9 Lembaga Tabung Haji 9.8 FYE Dec FY11 FY12 FY13 EPS Revision (%) Var to Cons (%) PE Band Chart PER = 16x PER = 13x PER = 10x Forecasts. Maintained. Risks. The risks include: (1) New contracts secured in FY12/12-13 coming in below our target of RM300m p.a.; and (2) Escalation in input costs. Maintain Outperform. We have turned positive on the construction sector as there is now even more urgency for the Government to expedite the rollout of various public projects to pump prime the local economy to shield it against the increased risk of the global economy slipping into a double-dip recession. TRC is one of our top picks for the construction sector given that it is a good proxy to the MRT project, the single largest project that will anchor the current construction cycle. TRC is the only out of the 28 companies short-listed to bid for the 18 above-ground work packages that is pre-qualified to bid in all the six categories. Indicative fair value is RM0.81 based on 12x fully-diluted FY12/12 EPS of 6.7sen, in line with our benchmark 1-year forward target PER of 10-14x for the construction sector. An additional downside protection to its share price will come from a strong balance sheet with a net cash of RM118.5m as at 30 Jun 2011, translating to 25.4sen/share. Relative Performance To FBM KLCI TRC Synergy FBM KLCI Joshua CY Ng (603) joshuang@rhb.com.my Please read important disclosures at the end of this report. Page 1 of 5

2 Going All-Out For MRT, Bullish On Brunei Highlights. Key takeaways from our recent meeting with TRC are: 1. TRC intends to bid for all 18 above-ground work packages of the Sg Buloh Kajang (SBK) Line of the Klang Valley MRT project; and 2. TRC is bullish on the construction market in Brunei, given the tremendous room for public infrastructure spending in the sultanate. Going all-out for MRT. TRC is going all-out for work packages of the MRT project. Its tender department has been instructed to prepare and put in bids for all the 18 above-ground work packages of the SBK Line of the Klang Valley MRT project in all six categories comprising open elevated civil work (five packages), open station (five packages), open depot (one package), bumiputera elevated civil work (three packages), bumiputera station (three packages) and bumiputera depot (one package) (see Table 2) worth a total of RM12-13bn based on our estimate. As a matter of fact, TRC is the only construction company that can bid for all the 18 above-ground work packages as it is the only out of the 28 companies short-listed to bid for the aboveground work packages that is pre-qualified to bid in all the six categories. For elevated civil works that we consider the jewels of the above-ground work packages, TRC has a significant edge over its competitors by virtue of the specialised construction equipment it owns, particularly, the RM20m girder launcher and gantry used in the RM950m Package A main contract of the Kelana Jaya LRT Line extension project. The girder launcher and gantry can be re-deployed in elevated civil works for the MRT project (see Image 1 for a girder launcher at work). Assuming that the girder launcher and gantry can be used to execute RM1bn worth of elevated civil works, this translates to a 2%-pt margin advantage to TRC (RM20m over RM1bn) that is significant. In our earnings forecasts, we assume TRC to secure RM600m worth of new contracts over the next two years, i.e. RM300m each in FY12/12 and FY12/13. Assuming that the MRT project is to get off the ground, this does not at all appear to be a tall order to TRC as it could be achieved with only one above-ground MRT work package (on average, the above-ground MRT work packages are worth about RM700m each, i.e. RM12-13bn divided by 18). To recap, MRT Co, the project/asset owner of the Klang Valley MRT, is expected to start calling for tenders for the 18 above-ground work packages for the SBK Line between now and Dec According to MRT Co, setting the ball rolling, will be the elevated civil work packages for the 5.4km Taman Bukit Ria Plaza Phoenix stretch and the 5.2km Taman Suntex Bandar Hussein Onn stretch. Bullish on Brunei. TRC is bullish on the construction market in Brunei, given the tremendous room for basic infrastructure spending including roads, housing, hospitals and universities. Already, TRC in Oct 2011 secured a RM319m contract for the modernsation of Brunei International Airport Terminal. Brunei is not a new market to TRC. Apart from eyeing basic infrastructure projects, recall, TRC has been pitching for a multi-billion ringgit crude oil refinery and storage project in Brunei, the brainchild of TRC s 26%-owned associate Petro Bru (B) Sdn Bhd. First initiated in Jan 2008, the detailed feasibility study of the project by international consultant Wood MacKenzie was subsequently completed in Jun 2009 with positive results. The project is now pending the final approval from the Brunei government. The project, if it happens, will be two bites on the same cherry for TRC, i.e.: (1) A slice of action in the infrastructure works (including land reclamation) estimated at B$2bn (RM4.8bn), and building jobs of the refinery and storage facility estimated at US$4.3bn (RM12.9bn) on the proposed site, i.e. Pulau Muara Besar, Brunei; and (2) Return on investment on the project. Forecasts. Maintained. Risks. The risks include: (1) New contracts secured in FY12/12-13 coming in below our target of RM300m p.a.; and (2) Escalation in input costs. Maintain Outperform. We have turned positive on the construction sector as there is now even more urgency for the Government to expedite the roll-out of various public projects to pump prime the local economy to shield it against the increased risk of the global economy slipping into a double-dip recession. TRC is one of our top picks for the construction sector given that it is a good proxy to the MRT project, the single largest project that will anchor the current construction cycle. TRC is the only out of the 28 companies short-listed to bid for the 18 above-ground work packages that is pre-qualified to bid in all the six categories. Indicative fair value is RM0.81 based on 12x fully-diluted FY12/12 EPS of 6.7sen, in line with our benchmark 1-year forward target PER of 10-14x for the construction sector. An additional downside protection to its share price will come from a strong balance sheet with a net cash of RM118.5m as at 30 Jun 2011, translating to 25.4sen/share. Page 2 of 5

3 Table 2: Companies Pre-qualified To Bid For Above-Ground MRT Work Packages Elevated Civil Works (8 packages) Open Category (5 packages) Mudajaya Corporation Tran Resources Corporation Sdn Bhd MTD Construction Sdn Bhd MRCB Engineering Sdn Bhd Gadang Engineering (M) Sdn Bhd Konsortium Putra Perdana Const & Worthy Builder JV. Bumiputera Category (3 packages) MTD Construction Sdn Bhd Bhd Zecon Sdn Bhd Cergas Murni Sdn Bhd Tidal Marine Engineering Sdn Bhd. Stations (8 packages) Open Category (5 packages) Fajarbaru Builders Sdn Bhd Gadang Engineering (M) Sdn Bhd Pembinaan Mitrajaya Sdn Bhd WCT Berhad Kencana Torsco Sdn Bhd - Al Ambia JV Konsortium PPC - WB JV (Putra Perdana Const. & Worthy Builders S/B) Bumiputera Category (3 packages) SN Akmida Holdings Sdn Bhd Kembang Serantau Sdn Bhd Apex Communication Sdn Bhd Pembinaan Bukit Timah Sdn Bhd Perkasa Sutera Sdn Bhd Dekon Sdn Bhd Bhd. Depots (2 packages) Open Category (1 package) Fajarbaru Builders Sdn Bhd Gadang Engineering Sdn Bhd Kenchana Torsco Sdn Bhd Al Ambia JV. Bumiputera category (1 package). Perkasa Sutera Sdn Bhd Bhd Dekon Sdn Bhd. Source: MRT Co Page 3 of 5

4 Image 1: A Girder Launcher At Work Source: Table 3: Outstanding Construction Orderbook Project Value (RMm) Main contract, Package A, Kelana Jaya LRT Line extension Brunei Airport* Upgrading of Lumut Jetty* 51.4 Submarine facilities for Royal Malaysian Navy* 45.0 Public housing, Pricinct 8, Putrajaya* 43.8 Maritime college, Kuantan 40.0 Upgrading of Container Terminal 1, Northport 25.0 Upgrading of Kota Bharu Airport 25.0 Parliament House makeover* 24.0 University Kuala Lumpur 16.0 Warehouses, Bintulu Port 15.0 Sibu - Bawang Assam Seredang road 5.0 Total 1,559.1 *Secured during FY12/11 Source: Company, RHBRI Page 4 of 5

5 Table 4: Earnings Forecasts Table 5: Forecast Assumptions FYE Dec (RMm) FY10a FY11F FY12F FY13F FYE Dec FY11F FY12F FY13F Turnover Construction EBIT margin (%) Turnover growth (%) New orderbook secured (RMm) Source: RHBRI estimates EBITDA EBITDA margin (%) Depreciation Net Interest Associates EI Pretax Profit Tax PAT Minorities Net Profit Source: Company data, RHBRI estimates IMPORTANT DISCLOSURES This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. 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Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of the Connected Persons, including investment banking personnel. The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues. The recommendation framework for stocks and sectors are as follows : - Stock Ratings Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months. Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks. Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months. Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months. Industry/Sector Ratings Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months. RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon request. This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect. Page 5 of 5