Results Review

• SUNCON’s 9MFY23 core profit of RM96.4mn came in within our expectation but below the consensus forecast, accounting for 71.9% and 68.7% of ours and consensus’ full-year estimates, respectively.

• YoY, 9MFY23 core profit dropped 4.4% to RM96.4mn although revenue was 9.0% higher at RM1,799.7mn. The weaker bottom line was largely due to the construction segment. The PBT for the construction segment fell by 4.5% to RM116.9mn from RM122.3mn a year ago, as the profit margin in the preceding year was higher due to the finalisation of accounts for certain completed projects. Nevertheless, the precast segment’s PBT doubled to RM11.0mn from RM5.4mn a year earlier thanks to higher revenue due to higher contributions from both integrated construction and prefabrication hubs in Singapore and newer projects.

• QoQ, 3QFY23 core profit jumped 18.7% to RM38.3mn while revenue was 11.5% higher at RM673.5mn. Both construction and precast segments mainly contributed to the stronger earnings performance.

Impact

• Maintain FY23 to FY25 earnings forecasts.

Outlook

• The group’s current outstanding construction order book is around RM5.8bn, translating to about 2.7xFY22 revenue. YTD, the group has secured RM2.2bn of new contracts. Meanwhile, the group has an active tender book of about RM26.4bn. The group will continue focusing on bidding for jobs from niche segments such as data centres, semiconductor factories, and warehouses.

Valuation

• The target price is maintained at RM1.73, based on unchanged 14xCY24 earnings. Maintain a Sell call on the stock on valuation grounds.

Source: TA Research - 22 Nov 2023