Sunway Construction achieves RM2.2b worth of projects

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Sunway Construction Group Bhd
(Sept 14, RM1.12)

Maintain buy call with a higher target price (TP) of RM1.52: Sunway Construction Group Bhd (SCG) has secured a project from Putrajaya Holdings Sdn Bhd for the construction of government office buildings in Pusat Pentadbiran Kerajaan Persekutuan, Putrajaya, worth about RM1.6 billion. 

We are pleasantly surprised with the amount as we did not expect it to come in as a single package. 

Inclusive of this contract, SCG has successfully secured a total of RM2.2 billion worth of projects, exceeding our and management expectations of RM1.5 billion and RM2 billion respectively. 

In effect to that, we made upward adjustments to our financial year ending Dec 31, 2015 (FY15) and FY16 forecasts higher by 6.2% and 6.3%, hence deriving a new TP of RM1.52 (from RM1.43). We reiterate our “buy” call.

With this project, SCG has secured a total of RM2.2 billion worth of projects year-to-date, hence pushing its outstanding order book to approximately RM4.3 billion. This should keep the group busy for the next three years. 

Assuming a profit before tax margin of around 8%, the project’s pre-tax profit should be around RM128.8 million. 

We retain our positive view on SCG with expected advantages from the construction package of the Light Rail Transit 3 and Mass Rapid Transit 2; a dominant role in the Bus Rapid Transit project; strong earnings visibility; an attractive dividend; and continuously getting support from Sunway Group. — BIMB Research, Sept 14

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This article first appeared in digitaledge Daily, on September 15, 2015.