Sunway Construction’s job wins garner mixed views

KUCHING: Sunway Construction GroupBhd’s(SunwayConstruction) latest job wins has garnered mixed views from analysts, ranging from neutral to positive.

According to the research arm of Kenanga Investment Bank Bhd ( Kenanga Research), Sunway Construction announced three new contracts cumulatively worth RM209 million from MMC Gamuda KVMRT ( PDP SSP) Sdn Bhd (MMC Gamuda) and Sunway Bhd (Sunway).

Kenanga Research was neutral on the awards which were within the research arm’s financial year 2016 estimate (FY16E) order book replenishment target of RM2.9 billion.

Year- to- date ( YTD), Sunway Construct ion has secured RM2.6 billion worth of contracts representing 90 per cent of the research arm’s target with a remainder of circa RM300 million to be achieved.

It said that assuming six per cent profit before tax (PBT) margin, these contracts are expected to contribute circa RM6.6 million to bottom line per annum.

Kenanga Research noted that post- award win, Sunway Construct ion’s outstanding order book stands at RM5 billion providing earnings visibility for the next two to three years.

The research arm believed its FY16E replenishment target of RM2.9 billion was highly achievable underpinned by anticipated project wins from LRT3, which was expected by year-end or beginning of 2017.

On the other hand, with the latest job wins, Sunway Construction has secured RM2.6 billion worth of new construction jobs YTD, exceeding management’s full-year target and the research arm of TA Securities Holdings Bhd’s (TA Research) assumption of RM2.5 billion for 2016.

As for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), altogether the impact was positive and fell within its job replenishment assumptions, hence it made no changes to its earnings forecasts at this juncture.

Kenanga Research also made no changes to its FY16-17E earnings forecasts as these awards were within the research arm’s FY16E replenishment target.

In contrast, TA Research revised its FY16 order book replenishment assumption higher to RM2.6 billion and raise FY17 and FY18 earnings forecasts by 2.4 per cent and 1.6 per cent respectively.

Following the earnings revision, TA Research upgrade Sunway Construction to ‘buy’ and raised the stock’s target price from RM1.80 per share to RM1.85 per share, based on unchanged 15-fold current year 2017 (CY17) earnings per share (EPS).

MIDF Research maintained its ‘neutral’ recommendation with a sum of parts (SOP)-based target price of RM1.74 per share.

Kenanga Research also maintained its ‘outperform’ call on Sunway Construction with an unchanged target price of RM1.81 per share.