SUNCON Marks Significant Progress In Vietnam As Orderbook May Expand

The recent development involves Toyo Ventures Holdings accepting a USD980m equipment procurement facility for the 2.12GW Song Hau 2 thermal power plant in Vietnam, marking a notable advancement in the project. Sunway Construction Bhd’s (SUNCON), holding a 55% stake in the joint venture, has an effective share value of MYR6bn from the project.

If the financial close is achieved by the end of June, the project is expected to boost earnings by less than 5% in FY24F and 20-35% in FY25F and FY26F. The outstanding order book may expand to MYR12bn from MYR6.3bn. The company’s FY25F earnings per share are pegged to an unchanged target P/E of 20.5x, incorporating a 6% ESG premium.

RHB Investment Bank (RHB) said today (June 10) the stock received a maintained BUY rating from with a target price of MYR3.81 on SUNCON, reflecting a 15% upside and a 3% yield.

Currently trading at 19x of their price-to-earnings (P/E) ratio (FY25), Sunway Construction’s higher-than-peer return on equity justifies its premium. Long-term catalysts include potential benefits from the Johor-Singapore Special Economic Zone and Sunway’s hospital network expansion plans.

SUNCONs forecasted recurring net profit shows growth, RHB said with estimates of MYR176m in FY24F, MYR226m in FY25F, and MYR259m in FY26F. The dividend yield is expected to increase from 2.5% in FY24F to 3.7% in FY26F.

The stock’s strong performance, with a year-to-date increase of 70.1%, underscores its positive outlook and potential for future growth.

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