Sunway Construction Group Bhd (SunCon) has reinforced its position as a leading data centre contractor after securing a RM1.02 billion mechanical, electrical and plumbing (MEP) fit-out contract for a data centre development in Johor, prompting Kenanga Research to reaffirm its positive outlook on the company.
The research house maintained its “Outperform” call on SunCon with an unchanged target price of RM8.40, saying the latest contract further demonstrates the group’s ability to secure high-value projects from global data centre operators.
The contract, awarded by a United States-based multinational technology corporation, is scheduled for completion by the fourth quarter of 2027.
Kenanga noted that the award was largely anticipated, as SunCon had previously secured the RM570 million core-and-shell construction package for the same data centre project in December last year, which included an option for the MEP works to be awarded to the group.
Given the specialised nature of MEP works, the research house expects the project to deliver profit-before-tax margins at the higher end of SunCon’s typical 5% to 8% margin range.
With the latest contract, SunCon’s year-to-date new order wins have reached RM5.8 billion, bringing the group closer to Kenanga’s full-year replenishment assumption of RM7 billion. The research house also expects management to raise its official contract win target when it announces its second-quarter 2026 financial results later this month, from the current RM6 billion target.
SunCon’s outstanding order book now stands at RM10.4 billion, providing earnings visibility over the next two to three years.
Looking ahead, Kenanga said SunCon continues to enjoy a strong pipeline of opportunities, particularly in the fast-growing data centre segment. The group is currently participating in tenders for projects from five data centre clients, comprising three existing customers and two new ones.
Overall, SunCon’s active tender book remains sizeable at approximately RM14.3 billion, spanning both data centre and conventional construction projects. The group is also expected to continue benefiting from recurring in-house contracts from the Sunway Group.
Kenanga maintained its earnings forecasts for SunCon, leaving its FY2026 and FY2027 job win assumptions unchanged at RM7 billion and RM6 billion respectively, with the bulk of replenishment expected to come from data centre developments.
The research house said SunCon remains one of its preferred construction stocks, supported by strong sector prospects driven by major public infrastructure projects, a healthy recurring pipeline from its parent group, and its established expertise across building, infrastructure, solar and MEP engineering works.
However, it cautioned that risks to its outlook include weaker-than-expected construction job flows, project cost overruns, potential liquidated ascertained damages (LAD), and rising building material costs.
