• Sunway Construction (SunCon) has secured an additional contract from Yellowwood Properties Sdn Bhd that is worth RM265mn.

• The contract involves the tenant improvement works (TIWs) for on-going JHB1X0 data center project. This has boosted the total contract value for JHB1X0 to RM3.5bn (from RM3.2bn) and further bolstered its outstanding orderbook by 4% to RM7.8bn.

• We raise our earnings estimate for FY24F/FY25F/FY26F by 1.7%/ 4.7%/5.0% in anticipation of further expansion in its orderbook underpinned by (i) influx of high-value data center projects, (ii) solid number of projects in the pipeline from the Sunway Group, (iii) robust demand for precast products, and (iv) infrastructure projects such as resumption in LRT3 stations and Penang LRT.

• Maintain a HOLD call for SunCon, with a higher TP to RM4.27 (previously RM3.90). This is based on 5-year average PER of 23.6x pegged to FY25F EPS of 18.1sen.

Additional Job for JHB1X0

SunCon has clinched an additional RM265mn contract for tenant improvement works (TIWs) on its JHB1X0 data center project in Sedenak, awarded by Yellowwood Properties Sdn Bhd. This brings the cumulative TIWs for the project to RM347mn, elevating the total contract value to RM3.5bn from RM3.2bn. Despite the expanded scope, SunCon is on track to complete the project by 1QCY26.

Data Center Dominance

As at YTD2024, SunCon has secured RM3.9bn in new contracts (refer to Table 2 & Chart 1), bringing its outstanding orderbook to RM7.8bn. SunCon’s continued focus on data center projects underscores its expertise in this specialized sector, with data center related jobs now comprising c.50% of its total orderbook and the JHB1X0 project series alone accounting for 23.7%. As such, we believe SunCon is wellpositioned to exceed its internal orderbook target.

Earnings Revision

We revised our FY24-26 orderbook replenishment assumption to RM4.7bn/RM5.2bn/RM5.5bn respectively, which led to revisions in our earnings forecasts by 1.7%/ 4.7%/5.0% (refer to Table 1). Overall, our orderbook replenishment assumption is backed by (i) SunCon’s active pursuit of high-value data center projects, (ii) steady in-house projects from Sunway Group in the pipeline, and (iii) robust precast production from its Integrated Construction and Prefabrication Hub (ICPH). Besides that, further growth is anticipated from upcoming opportunities, including the resumed LRT3 stations and the Penang LRT project, both of which provide substantial upside to SunCon’s project portfolio.

Maintain HOLD with higher TP of RM4.27

We maintain a HOLD call on SunCon, with an increased TP of RM4.27 (up from RM3.90), based on 5-year average PER of 23.6x pegged to FY25F EPS of 18.1sen, which implies a +0.5 SD above its 5-year historical mean PER of 20.2x (refer to Chart 2). This reflects our optimistic outlook for SunCon’s orderbook expansion, driven by: i) a first-mover advantage in Johor’s data center industry, ii) a steady stream of internal contracts from its parent company, and iii) robust demand for precast products in Singapore.

Source: BIMB Securities Research - 1 Nov 2024