Highlights

Kenanga Research & Investment

Author: kiasutrader   |   Latest post: Fri, 10 Apr 2020, 9:12 AM

 

Sunway Construction Group - Steady Performance Ahead

Author:   |    Publish date:


FY19 CNP of RM129.3m met expectations, accounting for 105%/98% of our/consensus numbers. Forward earnings will be underpinned by outstanding order-book of RM5.2b, following contract wins of RM1.8b last year. We are upgrading our call to OUTPERFORM with TP of RM2.15 (based on P/E of 16.5x on FY20 earnings) (from RM1.45 previously).

Within expectations. FY19 CNP of RM129.3m (-10.5% YoY) accounted for 105%/98% of our/consensus estimates with top-line declining 21.6% YoY to RM1.8b. Overall earnings fell as the Group’s performance was dragged by lower net profit contribution of RM125.9m (-12.1% YoY) from the construction division. Meanwhile, the precast concrete segment contributed net profit of RM3.4m in FY19 (up from RM1.1m in FY18). It declared DPS of 3.5 sen, taking full-year DPS to 7.0 sen.

Results’ highlight. 4QFY19 CNP came in at RM31.6m (-5.6% QoQ/- 13.3% YoY) on the back of turnover of RM485.9m (+20.7% QoQ/- 22.4% YoY). In terms of segmental breakdown, in the final quarter: (i) the construction division posted net profit of RM28.0m (-17.2% QoQ/- 27.1% YoY); and (ii) the precast concrete business contributed net profit of RM3.7m, turning around from net losses of RM0.3m in 3QFY19 and RM1.9m in 4QFY18. On the margin front, pretax profit margin stood at 8.6% in 4QFY19 (versus 9.7% in 3QFY19 and 8.4% in 4QFY18) for the construction division, bringing full-year margin to 9.6% (from 8.6% the year before). Precast concrete division’s pretax profit margin also rose, to 1.8% in FY19 from 0.7% in FY18. As of end-Dec last year, the Group is in a net cash position of RM407m (or 32.0 sen per share).

Strong earnings visibility ahead. SUNCON secured new contracts totalling RM1.8b in FY19 (versus RM1.6b in FY18). This has lifted outstanding order-book to RM5.2b as of end-Dec 2019, which will underpin forward earnings and represents 3.2 times last year’s construction revenue. The Group is targeting an order-book replenishment of RM2b in FY20 (which is also our new contract wins assumption). We have revised up our net profit forecast to RM169m (+7.6%) for FY20 and RM176m (new) for FY21 after assuming slightly stronger margins and better contributions from the precast concrete segment.

Upgrading call and TP. Applying a higher P/E multiple of 16.5x (which is pegged at +1SD above its 3-year mean) on a stronger earnings base, we have upped our target price from RM1.45 to RM2.15. With potential total returns of 13.3%, we also upgrade our call on SUNCON to OUTPERFORM.

Risks to our call include: (i) lower-than-expected margins/order-book replenishment, and (ii) delays in construction progress.

Source: Kenanga Research - 21 Feb 2020

Share this
Labels: SUNCON

Related Stocks

Chart Stock Name Last Change Volume 
SUNCON 1.69 +0.02 (1.20%) 796,000 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View Trading Signals and run Live Backtest
MQ Affiliate
Earn rewards with MQ Affiliate Program
 
 

142  581  438  1045 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 ARMADA 0.17-0.015 
 HIBISCS 0.49-0.035 
 VELESTO 0.155-0.015 
 TRIVE 0.0050.00 
 SAPNRG 0.105-0.005 
 HIBISCS-WC 0.155-0.015 
 SANICHI 0.045-0.005 
 KNM 0.155-0.015 
 DGB 0.0250.00 
 ALAM 0.07-0.01 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
2. MQ Affiliate – A smarter way to earn more rewards MQ Trader Affiliate Program
3. MQ Affiliate – How to become an effective affiliate MQ Trader Affiliate Program
4. MQ Affiliate – Upgrading to Affiliate Partner MQ Trader Affiliate Program
Partners & Brokers