Toyo’s unit had engaged SunCon and its Vietnamese partner to undertake the engineering, procurement, commissioning and construction (EPCC) works for the Song Hau 2 thermal power plant in Hau Giang province.
The initial EPCC contract, worth US$2.42 billion (RM11.4 billion), was signed in March 2023.
In a bourse filing yesterday, Toyo said its wholly-owned subsidiary, Song Hau 2 Power Company Ltd (SH2P), had received a letter from Vietnam’s ministry of industry and trade on July 1, 2024 confirming the termination of the build-operate-transfer (BOT) contract for the project.
The letter stated the 90-day period since the issuance of the “notice of intention to terminate” to the company had expired but SH2P had not remedied the financial arrangement for the project.
In a note today, RHB Research said there is no financial impact to its earnings estimates for SunCon as the estimated RM6 billion job value (an effective 55% share) was not included in SunCon’s order book.
“We view the development to be of no major concern to SunCon as its outstanding order book of RM7.9 billion may provide earnings visibility over the next three years.
“Furthermore, the group may be able to focus on delivering more data centre (DC) jobs that constitute around 50% of its outstanding order book.
“Aside from DCs, SunCon has various tenders related to warehouse and semiconductor manufacturing facilities,” it added.
RHB maintained its “buy” call on the stock and raised its target price to RM4.92 from RM4.32 previously. It also raised its FY2025F-FY2026F earnings forecast by 14% each.
Project yet to commence
Likewise, TA Securities said the project termination should not impact SunCon’s earnings as work on the power plant had yet to start.
In addition, the project is also not part of SunCon’s order book replenishment target for this year, said TA, which maintained its “buy” call on the counter.
However, the research house was surprised by news of the contract termination as Toyo had just secured a financing facility of US$980 million (RM4.62 billion) last month.
Earlier this week, the ink manufacturer cum energy investor said it had postponed the commencement of EPCC works for the power plant project by up to six months.
Investors have taken the news of the contract termination in their stride. At 3.47pm, SunCon’s shares were up 14 sen or 3.4% to RM4.27, valuing the group at RM5.52 billion.
However, Toyo was not so fortunate as its shares fell another 18 sen or 17% to 88 sen at 3.58pm, valuing it at RM117.62 million.
It had tumbled as much as 35 sen or 25% to RM1.03 yesterday on news reports the Vietnamese government had terminated its unit’s contract for the Song Hau 2 power plant.