Sunway Construction (SCGB) posts 1H23 core profit of RM58.2m.
“We project a 5-year earnings compounded annual growth rate of 25% for SCGB, backed by the Johor data centre job and steady job awards from its listed parent,” said RHB Research (RHB) in the recent Malaysia Results Review.
Further on, SCGB posted a RM42m profit before tax in 2Q23, with the construction segment reporting a 5% YoY profit before tax decline during the quarter, as 2Q22 saw the finalisation of accounts for some completed projects.
This offset the 2.4% YoY increase in construction revenue for 2Q23 amid better progress of new projects. Its precast segment recorded a 2Q23 profit before tax of RM3.2m, supported by better progress in projects related to the Integrated Construction and Prefabrication Hub (ICPH). SCGB’s construction orderbook stood at RM5.8bn as at end 2Q23 with RM1.6bn orders secured.
“We expect higher billings in remaining quarters as progress of projects move higher along the S-curve. We believe job replenishments will remain steady, backed by its parent which contributed 56% of YTD job wins, while SCGB has participated in two new tenders under the Rapid Transit System (RTS) link,” said RHB.
Also, the RM6bn Song Hau 2 power plant project in Vietnam, which is awaiting financial close, likely by September or October, could boost FY24-25F earnings by 30-35%.
SCGB’s success in securing a 29.9MW quota under the Corporate Green Power Programme may also enable it to create a new source of recurring income.
“Short- to medium-term catalysts include faster-than-expected awards of industrial buildings (warehouses, factories, data centres) and infrastructure projects such as the Bayan Lepas Light Rail Transit and Mass Rapid Transit 3,” said the research house.
Key risks identified by RHB are project delays and a prolonged period of high material costs.
