Sunway Construction Group Berhad (SunCon) has strengthened its data centre exposure after two previously announced Project Services Requests (PSRs) from a United States-based multinational technology corporation were converted into full contract awards, increasing the total contract value to RM865.6 million.
According to Kenanga Research, the latest contract conversion represents an increase of RM664.4 million from the earlier PSR value.
The two data centre substation projects, located in Johor, commenced in April 2026 and are expected to be completed by the second quarter of calendar year 2027 and the second quarter of calendar year 2028 respectively.
Kenanga said the substations are understood to support approximately five to six data centre facilities, further strengthening SunCon’s position in Malaysia’s rapidly expanding digital infrastructure sector.
The projects are expected to deliver profit-before-tax margins within SunCon’s guided range of 5% to 8%.
Order Book Climbs to RM8.8 Billion
Following the latest contract upgrade, SunCon’s year-to-date contract wins have reached RM4.2 billion, while its outstanding order book has expanded to RM8.8 billion.
Kenanga said the enlarged order book provides earnings visibility for the next three years.
Despite acknowledging the positive contract development, the research house maintained a neutral stance on the latest award, noting that the progress remains within its FY2026 job win assumption of RM7 billion and management’s internal target of RM6 billion.
Strong Data Centre Pipeline
Kenanga highlighted that SunCon continues to maintain a strong contract pipeline, with the company actively participating in data centre tenders involving six other clients.
The tender pipeline comprises four existing customers and two new clients, covering both data centre and non-data centre projects.
SunCon’s active tender book remains elevated at approximately RM15.3 billion, supported by sustained demand for data centre infrastructure.
The company is also expected to benefit from recurring internal projects from the wider Sunway Group.
Earnings Forecast Upgraded
Following the stronger contract outlook, Kenanga raised its FY2027 earnings forecast for SunCon by 8%.
The upgrade was driven by a higher FY2027 job win assumption of RM6 billion, including RM4 billion from data centre projects, compared with its previous assumption of RM5 billion with RM3 billion from data centres.
Construction revenue recognition was also raised by RM500 million to RM6.5 billion.
However, Kenanga maintained its FY2026 earnings forecast based on a RM7 billion job win assumption, including RM5 billion from data centre projects.
Target Price Raised to RM8.40
Following the earnings upgrade, Kenanga increased its target price for SunCon to RM8.40 from RM7.76, based on an unchanged price-to-earnings ratio (PER) valuation of 22 times.
The valuation remains aligned with its benchmark for large-cap construction companies.
Kenanga also maintained its “Outperform” recommendation on SunCon, citing strong sector prospects, improving infrastructure demand and the company’s extensive capabilities across building, infrastructure, solar, mechanical, electrical and plumbing works.
The research house said SunCon’s key strengths include its RM8.8 billion order book, recurring projects from its parent and related companies, and strong track record in executing large-scale projects.
Risks Remain
Kenanga highlighted several risks to its outlook, including weaker-than-expected construction job flows from the public and private sectors, potential project cost overruns, liquidated damages exposure and rising building material costs.
Nevertheless, the firm expects SunCon to remain well-positioned to benefit from Malaysia’s ongoing data centre expansion and upcoming infrastructure developments.
