• Background – Started off in 1981, Sunway Construction has grown to become the third largest construction player in Malaysia, based on market capitalisation, through the participation and completion of several key construction projects like the Bandar Sunway township. Completed several major infrastructure and road projects in India, construction of a government building in Trinidad and Tobago, as well as a mixed development project in United Arab Emirates (UAE).

• Key Strengths – The only pure-play listed construction company in Malaysia involve in all three key transportation projects – LRT, MRT, BRT. Proven track record of having completed several mega-infrastructure projects whilst maintaining strong relationship with Putrajaya Holdings, KLCC Group of Companies, Syarikat Prasarana Negara and Iskandar Malaysia Studios.

• Future Plans – Solid outstanding orderbook of RM4.97 bln (58% from public projects, 27% from internal Sunway Group projects, 15% from private projects) to provide earnings visibility over the next 2-3 years. Given the increasing demand for precast concrete products, it would expand its annual precast concrete capacity by another 4 lines (from the existing 26 lines) by 2Q2017, adding to the existing production capacity of 252,000 m³ per annum.

• Investment Highlights – At current price of RM1.66, PERs at 15.8x and 13.6x for 2016 and 2017 respectively puts Sunway Construction Group’s valuation fair vs. the construction industry average of 13.5x. Dividend policy of minimum 35% pay-out from net profit.

Source: Mplus Research - 16 Nov 2016