• Sunway Construction (SunCon) has received a letter of award from GBS Suria for a large scale solar 4 project (LSS4) worth RM219mil. SunCon will design, engineer, procure, construct, test and commission a 50MW solar photovoltaic energy generating facility in Kampar, Perak.

• The duration of the job in Perak is 20 months from Jan 2023 to Sep 2024. We estimate that the project will contribute EBIT of RM11mil in total, with the bulk of earnings being recognised in FY24F.

• The project comes 2 months after SunCon won a similar job worth RM185mil from Sharp Venture Solar, the owner of another LSS4 project in Klang, Selangor.

• As the letter of intent for this job was issued back in Dec 2021, the project has already been accounted for as part of FY21 orders. YTD wins are RM1.7bil, which consist mainly of the data centre job in Sedenak Tech Park, Johor.

• We keep our forecasts unchanged as the new job is within our order book replenishment assumptions of RM2.9bil for FY23F. Potential jobs may come from the construction of warehouses and internal building jobs from companies within the Sunway group. We may raise our assumptions if SunCon wins either the MRT3 or the Vietnam power plant project.

• SunCon currently trades at an undemanding 12.8x FY23F PE, 9% below our benchmark for large-cap construction stocks. Hence, we maintain BUY with an unchanged fair value of RM1.84/share.

Source: AmInvest Research - 18 Jan 2023