KUALA LUMPUR: RHB Investment Bank Bhd (RHB IB) has maintained its “buy” call on Sunway Construction Group Bhd (SunCon) on expectations that its fourth-quarter 2022 (4Q 2022) core net profit would see an increase of 30% to 50% quarter-on-quarter to RM35 million to RM40 million.
In a note today, the investment bank said this would translate to financial year 2022 (FY2022) earnings growth of more than 20%, adding that the company’s performance will be backed by improved labour supply and operating conditions.
“Aside from venturing into data centres that are gaining traction, further earnings upside may come if SunCon takes on the engineering, procurement and construction contractor job for a power plant in Vietnam, which has an effective contract value of RM6 billion,” it said.
On the company’s outlook, the bank considers SunCon’s move to bid for data centre or industrial-related jobs to be strategic.
“Such a move may mitigate the risk of slow job replenishments from public infrastructure projects such as the Mass Rapid Transit 3 (MRT3) that is likely to be subject to cost review.
“For context, 8% of SunCon’s outstanding order book came from infrastructure/piling jobs as of end-September 2022 versus more than 40% as of end-December 2018,” it said.
RHB IB also estimated SunCon’s outstanding order book at RM5.5 billion to RM6 billion after taking into account the RM1.7 billion job win in December 2022 for the data centre in Johor. It also retained the company’s yearly new job win target of RM2.5 billion for FY2023-FY2024.
Hong Leong Investment Bank Bhd (HLIB) said SunCon is on target to achieve RM2 billion contract replenishment in FY2023.
“This could rise to RM8 billion in a bull case scenario, augmented by the Vietnam power plant job,” it said.
“There is further upside should the company prove successful in its Tier 1 MRT3 bids,” it added.
HLIB said that FY2023 will be an important year, execution-wise, as this could unlock further data centre jobs with opportunities on an uptrend.
It raised its FY2023 earnings forecast for SunCon by 10% but cut its FY2024 earnings forecast by 7.3%, adjusting the burn rate for the data centre project.
Both RHB IB and HLIB have maintained their “buy” call on SunCon, with a target price of RM2.07 and RM1.94, respectively.