Wednesday, August 28, 2013

TRC Synergy ... downgraded

Its prospect was downgraded following an accident involving its light rail transit (LRT) extension project in Subang Jaya, Selangor. The accident, which marked the second mishap involving TRC’s LRT extension project, would serve as a dent to the company’s share price, given the increased perception of execution risk, especially when it occurred so soon after the first mishap.

Possible negative impact from the weekend accident would include delays in the completion of the job; lawsuits for negligence; a loss of reputation, which may hamper its ability to secure new jobs in the future; and in the most extreme case, termination by Syarikat Prasarana Negara Bhd as the contractor.

A stop work order has since been issued to TRC by the Subang Jaya Municipal Council and Prasarana, pending an investigation into the latest incident, which saw a crane arm conducting piling works for the LRT extension project falling and crushing a car.

The first mishap involving TRC’s LRT extension project took place in March 2013 and resulted in a motorist being killed and another being seriously injured.

TRC Synergy could face delays in the completion of the Kelana Jaya LRT extension project, which may negatively impact its earnings for FY2013 ending Dec 31. The incidents may also affect its reputation and it may face legal risks.

As at May 31 2013, it had rm2.12 billion worth of outstanding construction order book, including the Kelana Jaya LRT extension project and the KVMRT Sungai Buloh depot project.

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.