PETALING JAYA: Sunway Construction Group Bhd ’s (SunCon) prospects are expected to remain strong, on the back of a record order backlog and the rollout of mega public infrastructure projects locally.
Kenanga Research said: “We like SunCon for its strong job prospects for the sector as a whole, with the imminent rollout of key public infrastructure projects.”
It also favours the construction outfit for its strong earnings visibility, underpinned by its RM6.3bil outstanding order book and recurring jobs from parent and sister companies, as well as its extensive capabilities and track record in building, infrastructure, solar, mechanical, electrical and plumbing works.
The research house has factored in annual job wins worth RM3.5bil for the company.
“We expect a significant revitalisation of the construction sector in 2024, backed by the rollout of the RM45bil Mass Rapid Transit 3 project, the RM9.5bil Bayan Lepas Light Rail Transit and several flood mitigation projects reportedly to be worth RM13bil,” it added.
Kenanga Research added that SunCon will stand to benefit from the vibrant private sector construction market, backed by massive investment in new semiconductor foundries and data centres.
The research house has maintained its target price (TP) of RM3.16, based on 18 times financial year 2025 (FY25) price-to-earnings (PE) ratio, which is in line with its valuation for big-cap construction companies such as Gamuda Bhd and IJM Corp Bhd .
Similarly, HLIB Research has maintained a “buy” call with a higher TP of RM3.75 from RM3.20, by pegging FY25 earnings per share to 21 times from 19 times PE multiple.
“We believe this above-average target multiple is warranted due to its Johor and data centre exposure. SunCon is a proxy to upcoming infrastructure project rollouts, vibrant advanced technology facility sector and a growing parent-co business,” it added.
HLIB Research pointed out that SunCon has bagged RM1.7bil worth of new contract wins in FY24 year-to-date.
“We reckon the possibility of SunCon finishing FY24 on a stronger note than our earlier assumed RM3.4bil wins looks increasingly higher.
“While SunCon’s tender book has diminished sequentially to RM9.4bil at present, this is almost entirely due to the expiry of two MRT3 tenders. We believe the company still has about four tenders in the advanced technology facilities (ATFs) space and would be in an advantageous position,” it said.
The research firm added that SunCon has been invited to potentially participate in ATF projects in India and Indonesia, opening up possibilities of regional penetration into a rapidly growing sector.