• Maintain HOLD (TP: RM4.27). Sunway Construction (SunCon) reported a 9M24 core net profit of RM117.7mn (+22.8% YoY) that aligns with our estimates, however fell short of consensus expectations at 73.7% and 67.4%, respectively. The strong performance was driven by accelerated progress in data center projects that has offset the weakness in precast segment. Looking ahead, we anticipate a gradual recovery in the precast segment, with momentum gaining as the Singapore Housing and Development Board (HDB) ramps up its launches. SunCon has declared a second interim dividend of 2.5 sen, bringing the total YTD DPS for FY24 to 6.0 sen. We maintain our HOLD call on SunCon with a TP of RM4.27, based on a 5-year average PER of 23.6x and FY25F EPS of 18.1 sen.

• Key Highlights. The company is executing five data center projects for four multinational corporations, comprising 54% of its RM7.1bn orderbook. This led to revenue growth of 40.9% YoY in its construction segment to RM832mn in 3Q24. Conversely, the precast segment’s turnover declined 59.6% YoY to RM34mn due to staggered rollouts of new projects. Notably 8,573 Build-To-Order (BTO) flats was launched as at October 2024, being the largest number in a single BTO exercise to date. However, despite strong HDB demand, the timing of these rollouts and ongoing contract execution are expected to slow earnings contributions in the near term.

• Earnings Revision. No changes.

• Outlook. SunCon has been capitalizing on both private and public sector opportunities while leveraging in-house projects from Sunway Berhad, particularly in specialized building developments. Additionally, we note on the progress of its annuity collections which already underway for the Meensurutti-Chidambaram Highway, meanwhile the ThorapalliAgraharam Jittandahalli Highway is on track for 2Q2025 completion. Its exploration of Advanced Technology Facilities (ATF) sector projects in ASEAN through local partnerships also reflects a strategic push for regional diversification.

Source: BIMB Securities Research - 22 Nov 2024