KEY INVESTMENT HIGHLIGHTS

• Additional RM265m of tenant improvement works (TIW) for JHB1X0 DC in Sedenak
• Total contract size grew to RM3.5b from RM3.2b previously; Feb-26 completion date remains intact
• Outstanding order book RM7.8b; data centre projects make up 53%
• Maintain NEUTRAL with an unchanged TP of RM4.46

Variation order. Sunway Construction Group Berhad (SunCon) is taking on an additional RM265m of tenant improvement works (TIW) for the JHB1X0 data centre in respect of variation orders under the contract.

Including the previous TIW that it accepted on 6th September of RM82m, SunCon has received a total TIW of RM347m.

Feb-26 completion remains intact. The TIW awarded by Yellowwood Properties Sdn Bhd raises the total contract amount to RM3.5b from RM3.2b previously. The completion date remains intact, with all phases of the project scheduled for completion by Feb-26.

Outstanding order book of RM7.8b. With the two new TIWs secured, SunCon's outstanding order book is now at RM7.8b, of which 52.7% are data centre jobs. Year-to-date, the group has replenished a total of RM3.92b worth of new jobs, on track to hit its 2024 replenishment target of between RM4.0b and RM5.0b. We are optimistic that the group can achieve the higher end of the target as we understand that there is an abundance of Advanced Technology Facilities (ATF) projects, which comprise data centers, warehouses and semiconductor factories. SunCon is actively bidding for jobs, with a tender book of RM13.7b as at Jun-24.

Earnings estimates. We maintain our earnings estimates as the TIW is within replenishment estimates.

Target price. We are also maintaining our TP for SunCon at RM4.46, pegging its FY25F EPS of 18.6 sen to a PER of 24x, which is +1SD above its five-year mean.

Maintain NEUTRAL. We view that the upcoming pipeline of projects remains healthy for the sector and SunCon is expected to be among the main beneficiaries of the rise in both private and civil construction jobs.

SunCon is now renowned for its data centre construction expertise, allowing it to ride on the data centre growth in the country with more construction jobs expected in the space. Our NEUTRAL recommendation is premised on the strong run-up in SunCon's share, which has surged 2.3x, indicating that the positives have been priced in.

Source: MIDF Research - 1 Nov 2024