AmInvest Research Reports

SUNWAY CONSTRUCTION - 1QFY24 in Line on Strong YoY Revenue Growth

AmInvest
Publish date: Thu, 23 May 2024, 11:13 AM
AmInvest
0 8,927
An official blog in I3investor to publish research reports provided by AmInvest research team.

All materials published here are prepared by AmInvest. For latest offers on AmInvest trading products and news, please refer to: https://www.aminvest.com/eng/Pages/home.aspx

Tel: +603 2036 1800 / +603 2032 2888
Fax: +603 2031 5210
Email: enquiries@aminvest.com

Office Hours
Monday to Thursday: 8:45am – 5:45pm
Friday: 8:45am – 5:00pm
(GMT +08:00 Malaysia)

Investment Highlights

  • We maintain BUY on Sunway Construction (SunCon) with an unchanged fair value (FV) of RM3.59/share based on 20x FY25F P/E, which is on par with its 3-year average. Our earnings forecast and 4-star ESG rating are unchanged.
  • 1QFY24 PATAMI of RM32.4 mil (+16.4% YoY) was within ours and consensus expectations. This has been a clean quarter with no cost surge or accounting surprises. No dividend was announced for the period (same as last year).
  • The construction sector saw strong revenue growth of 16% YoY on higher workflow and billings, but net income only increased by 7.6% YoY due to lower net income margin by 0.4 percentage points (PPT) YoY.
  • The precast segment improved significantly with better revenue (+16% YoY) and profit (+15.5% YoY) as legacy low- margin projects (signed before Covid but the actual work was done during pandemic) have lapsed.
  • However, sequentially, 1Q2024 net profit decreased by 34% QoQ due to the ramp-up of accelerated building progress and sustainable energy projects and jobs nearing completion in 4Q2023.
  • Net gearing has increased to 0.56x, from 0.51x as at the end of 2023, after taking on more jobs. However, the t-12 ROE is at 17.4% with strong cash flow.
  • Suncon’s orderbook has surged by 19% to RM6.3bil from the end of 2023, a backlog that will keep the company busy for at least two years. YTD, Suncon has secured RM1.7bil of new orders, which is on path to its target of RM2.5-3.0bil of job replenishment for 2024.
  • We believe the profit margins on upcoming projects will be higher than in the past two years as costs increase and post-Covid inefficiencies have been priced in. Furthermore, many operating cost items have remained stable.
  • Suncon currently trades at 18.5x 2025 PE, which is below its 3-year average of 20x, with a dividend yield of 3.3%.

Source: AmInvest Research - 23 May 2024

Related Stocks
Market Buzz
Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment