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SunCon to clinch RM1.5b-RM2b new construction jobs in 2018, says Affin Hwang

KUALA LUMPUR (May 3): Sunway Construction Group Bhd (SunCon) is expected to secure between RM1.5 billion and RM2 billion worth of new contracts in 2018, according to Affin Hwang Capital Research. 

Describing SunCon as having good external contract prospects and being well-positioned for future infrastructure jobs, Affin Hwang said the construction firm has submitted tenders worth more than RM2 billion worth of new projects.

According to Affin Hwang, the jobs included in-house projects owned by its parent firm Sunway Bhd, as well as external projects such as the redevelopment of headquarters for Tenaga Nasional Bhd, Phase 3 of Daya Bumi’s offices and hotel, as well as Bukit Bintang City Centre office tower. 

“We believe SunCon is an apolitical pure-play contractor that provides good construction sector exposure, with strong prospects to replenish its order book, given its excellent track record,” Affin Hwang analyst Loong Chee Wei said in a note to clients today.

As for Sunway’s in-house projects, Affin Hwang said SunCon’s parent firm plans to build five new hospitals at Sunway Velocity in Kuala Lumpur; Seberang Jaya in Penang; Ipoh in Perak; Damansara in Selangor; and Iskandar Puteri in Johor.

Each hospital will have about 250 beds and cost about RM250 million to RM300 million to build, Loong said.

Loong noted that SunCon currently has a high remaining order book of RM6.14 billion, equivalent to three-times the revenue chalked in 2017.

This “provides good earnings visibility and should sustain its construction activities up to the second quarter of 2021,” he added.

At present, Affin Hwang said SunCon’s major ongoing in-house projects include Sunway Medical Centre Phase 4; Sunway Velocity hotel, office and medical centre; and Sunway Serene serviced apartments.

Loong said SunCon is well-positioned for future infrastructure jobs, despite the construction, together with its partners, lost in the bid to be the project delivery partner for the Kuala Lumpur-Singapore high speed rail project.

“[I]t can still bid for station-building works and infrastructure works. There are six to seven stations planned and each [will] cost about RM2 billion,” Loong said, forecasting SunCon will secure RM2 billion of new contracts in both financial years ending Dec 31, 2018 (FY18) and FY19.

As SunCon’s recent share price correction provides an opportunity to accumulate the stock, Loong said he has upgraded his call on the stock to “Buy” from “Hold”, with a target price of RM2.45.

“The current share price is also supported by a high net cash position of RM353 million or 27 sen per share,” he noted, adding that the “potential total return is 13.6%, which includes a net dividend yield of 3.2% in FY18.”

Listed on the Main Market in July 2015, SunCon shares have rebounded by 12.2% from RM1.97 on March 4. As at 10:30am, its shares were trading at RM2.21, giving it a market capitalisation of RM2.86 billion. — theedgemarkets.com

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