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This article first appeared in The Edge Financial Daily on March 22, 2019

Sunway Construction Group Bhd
(March 21, RM1.82)
Maintain hold with a target price (TP) of RM1.70:
Sunway Construction Group’s (SunCon) two piling job wins with a combined value of about RM87 million has brought its year-to-date (YTD) 2019 job wins to RM868 million. Its outstanding order book of estimated RM6.1 billion should continue to present near-term earnings visibility. We make no change to our earnings having already factored in for job wins. Our TP of RM1.70, pegged to 14 times financial year 2019 FY19 price-to-earnings ratio (PER) (-1 standard deviation), is also unchanged.

 

The group, through its wholly-owned subsidiary, Sunway Geotechnics (M) Sdn Bhd, was awarded the bored piles works for package GS10 of the KVLRT 3 by SN Akmida Holdings Sdn Bhd with a contract sum of RM48 million. The project is expected to complete within 12 months in March 2020. Additionally, SunCon also secured another contract for piling and earthworks for a proposed Transit Oriented Development at Plot 7MD7 in Precinct 7, Putrajaya for a value of RM39 million. The construction period is for 16 months with completion by July 2020.

Assuming a pre-tax profit margin of 10% for both piling projects, we forecast a net profit contribution of RM6.6 million (0.51 sen earnings per share [EPS]) into financial year 2021 estimate (FY20E). With YTD job wins already hitting RM868 million, we believe SunCon’s internal target of RM1.5 billion for 2019 remains in check.

Our earnings forecasts are unchanged having already imputed RM1.5 billion of construction job wins for FY19E. Other potential job wins could come from property projects within Sunway Group and a property/hospital project in Myanmar. Order book wildcard could stem from the Large Scale Solar 3 (LSS 3), government hospital projects and Subang Aerotech Park by Khazanah. — Maybank IB Research, March 21

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