Analysts maintain order book call for Sunway Construct

KUCHING: Analysts maintain their more conservative order book replenishment assumption of RM1.7 billion for Sunway Construction Group Bhd.

AmInvestment Bank Bhd (AmInvestment Bank) recently met up with Sunway Construction for updates recently and gathered that year to date (YTD) order book wins amount to RM881 million.

“Despite achieving only 44 per cent of their targeted financial year 2023 (FY23F) job wins of RM2 billion, we maintain our more conservative order book replenishment assumption of RM1.7 billion for now,” the research firm said.

“With a tender book of RM17 billion, potential replenishment jobs may come from the construction of data centres and semiconductor manufacturing plants, internal building jobs from related companies of Sunway Group and the above-ground portion of the Mass Rapid Transit (MRT) 3.

“Sunway Construction has seen slowdowns in contractors being called to tender for private non-residential projects in recent weeks.

“We think project owners are holding back, pending post-general election stability.”

AmInvestment Bank gathered that Sunway Construction expects steel prices to stabilise in FY23F.

It also gathered that in June/July 2022, Sunway Construction managed to lock-in prices for steel that are needed until December 2022.

The research firm recalled that Sunway Construction obtained approval for 400 Indonesian workers earlier this year.

“Out of these, 300 have arrived while the remaining 100 will arrive by the end of the year. Including the existing 100 foreign workers, Sunway Construction's migrant workforce will amount to 500 in total.

“In comparison, Sunway Construction had a peak of 800 foreign workers during the construction of MRT2 and LRT3”

Currently, AmInvestment Bank estimated Sunway Construction's outstanding order book to be RM4.1 billion, which translates to 1.5-fold of FY23 revenue.

“However, we think that Sunway Construction is positioned to secure MRT3 jobs given its strong balance sheet and proven track records in MRT1 and MRT2.

“We believe the main contractor packages will be awarded in the fourth quarter of 2022 (4Q22)/1Q23, with subcontracting jobs to be given out in 1Q23.”

Meanwhile, the research firm anticipated Sunway Construction's operating margins to be stable at seven per cent in both FY23F and FY24F as most building material costs have reached their peak in 2QFY22.