Investment Highlights

• We raise our FY17-19F forecasts by 2.6%, 2.0% and 1.5% respectively, increase our FV to RM2.70 (from RM2.65) and maintain our BUY call.

• Our FV is based on 15x revised FY18F EPS, in line with our benchmark forward PE of 14-16x for large-cap listed construction companies.

• This follows the award by Ahmad Zaki to Sunway Construction (SunCon) of RM74.8mil substructure works of Bukit Bintang City Centre (BBCC) (Parcels 4 & 5), to be completed within the next 10 months. Additionally, SunCon won a bid to supply precast components for 1,179 dwelling units at Clementi Neighbourhood, Singapore, worth S$20.9mil (RM63mil), for a period of 21 months.

• The latest contracts boosted SunCon's YTD job wins to RM3.89bil (which have surpassed our full-year FY17F assumption of RM3.75bil) and outstanding construction order book to RM6.7bil (Exhibit 1). We are positive on the latest development.

• The earnings upgrade is to reflect the upward revision in our job replenishment assumption for FY17F to RM3.9bil. Meanwhile, we are keeping our assumption for job wins in FY18-19F at a more normalised level of RM2bil annually.

• We continue to like SunCon for: 1) its good earnings visibility underpinned by a sizeable outstanding order book which will keep it busy for the next 2-3 years; 2) its strong prospects for new job wins underpinned by various mega infrastructure projects, particularly the rail related ones, in the market; and 3) its proven track record with various blue-chip clients in the market.

Source: AmInvest Research - 13 Oct 2017