‘SunCon expected to post stronger results in H2’

Affin Hwang Capital expects Sunway Construction Group Bhd (SunCon) to post stronger results in the second half (H2) on the back of a RM781 million Tenaga Nasional Bhd (TNB) job and RM7.4 billion worth of tenders despite weaker results in the first quarter (Q1).

The research house said while SunCon’s net profit fell 13 per cent year-on-year to RM31 million in Q1, the group saw good order book replenishment, with RM1 billion new contracts, and is on track to meet its RM1.5 billion target this year.

“We maintain our earnings per share forecasts on expectation of an acceleration in progress billings in the H2,” it said.

SunCon has submitted tenders worth RM7.4 billion, including road and railway projects in India, piling jobs in Singapore and hospital contracts.

Affin Hwang said SunCon’s Q1 net profit of RM31 million made up only 20 to 21 per cent of market consensus and the research house’s financial year 2019 forecasts of RM145 million to RM153 million.

It said slow progress billings and completion of several projects in the previous year led to revenue slipping 17 per cent year-on-year and 30 per cent quarter-on-quarter to RM440 million in Q1.

“There was slower progress in billings for the Klang Valley MRT Line 2 (MRT2) and Light Rail Transit 3 (LRT),” it said.

Affin Hwang said SunCon remains its top mid-cap construction firm with a “buy” recommendation and a higher target price of RM2.24 from RM2.

“SunCon is a potential beneficiary of projects to be revived such as the MRT3, Penang LRT and East Coast Rail Link,” it said.