Suncon set to replenish its order book

PETALING JAYA: Sunway Construction Bhd (Suncon) continues to be successful in its order book replenishment with new orders that will ensure ample jobs going forward.

In the third quarter of 2022 (3Q22) it had secured jobs worth Rm463mil which took its total job wins year-to-date of Rm882mil, which is within its order-book replenishment target of Rm2bil.

Suncon’s outstanding order book stands at around Rm4bil (two times of revenue cover), said UOB Kay Hian (UOBKH) Research.

With the opening of the country’s economy, the research house said Suncon would be able to continue replenishing its order book on the back of its sizeable tender book of about Rm17bil.

According to UOBKH, Suncon expects more opportunities in the semiconductor, data centre and warehouse space.

The company is among the frontrunners for the civil packages on railway projects given its strong execution track record while its strong balance sheet that can help to meet the private finance initiative requirement.

Suncon’s nine-month financial year 2022 (FY22) core profit of Rm101.1mil came in within some analysts’ expectations.

TA Research made no change to its target price (TP) of RM1.57 a share on Suncon but upgraded the stock from “sell” to “buy” following the recent weakness in share price.

HLIB Research tweaked its FY22/23/24 earnings forecasts down 0.1%, down 2.4% and up 0.7% respectively after conservatively adjusting downwards replenishment assumptions for FY22 and FY23 in light of uncertainties.

It retained its “buy’’ call on Suncon with a marginally lower TP of RM1.83 post-earnings adjustments. The TP was derived by pegging the construction group’s mid FY22 earnings per share to 15 times ex-cash prices to earnings ratio.

Suncon also presents a safer exposure to future infrastructure project rollouts, backed by strong support from its parent-company.

Nevertheless, HLIB’S call is premised on no disruptive infrastructure policies from the impending new government.

It cited risks to its call being the mass rail transit circle line cancellation, prolonged political deadlock, elevated materials prices and labour shortage.

Kenanga Research kept its FY22 to FY23 forecast earnings for Suncon unchanged post results. It upgraded Suncon to “outperform’’ with an unchanged TP of RM1.60 a share.

It liked Suncon for its strong replenishment pipeline from its parent Sunway, its dominant position in the local construction space with extensive capabilities and track record in building, infrastructure, solar, mechanical, electrical and plumbing works.

It noted that Suncon’s strong balance sheet allows the company to participate in deferred payment model projects.

RHB Research did not make any changes to its earnings forecast on Suncon as its results were within expectations.

It retained its TP of RM1.93 a share and cited key risks being project delays and prolonged periods of high material costs.