Sunway Construction (SUNCON) has been awarded a refurbishment contract worth RM253 million for Sunway Carnival Mall. According to Kenanga Research (Kenanga), it comprises a 4-storey shopping complex and a 1-storey cultural/commercial centre with 1-storey basement in Seberang Jaya, Penang. Spanning a construction period of 24 months, the project is scheduled for completion by Jun 2025.
“We are positive on this latest contract that boosted SUNCON’s year-to-date job wins to RM1.5 billion, on track to meet our financial year 2023 future assumption of RM2.2 billion and lifted its outstanding orderbook by 2% to RM12.3 billion,” said Kenanga.
The guided earnings before interest and tax margin of 5%-8% is also in line with our assumption of 7.5%. Kenanga also kept their target price of RM2.13.
Kenanga expects a significant revitalisation of the construction sector in the second half of calendar year 2023, backed by the roll-out of the RM45 billion MRT3 project and six flood mitigation projects reportedly to be worth RM13 billion, and an accelerated disbursement of the massive RM97 billion gross development expenditure budgeted under Budget 2023.
Similarly, the private sector construction market is vibrant, underpinned by massive investment in new semiconductor foundries
and data centres. SUNCON is eyeing opportunities in data centre building jobs, MRT3 work packages and contracts from parent and sister companies.
“We like SUNCON for the strong job prospects of the sector as a whole, with the imminent roll-out of key public infrastructure projects. Also, it has strong earnings visibility underpinned by RM12.3 billion outstanding order book and recurring jobs from parent and sister companies. SUNCON also has extensive capabilities and track record in building, infrastructure, solar, mechanical, electrical and plumbing works,” said Kenanga, reiterating Outperform.
Risks to Kenanga’s recommendation include sustained weak flows of construction jobs from public and private sectors, project cost
overrun and liabilities arising from liquidated ascertained damages and rising cost of building materials.
