• SunCon secured construction works for TNB HQ Campus Phase 2 development worth RM781m after being shortlisted in Sep 2018.

• We expect this would add RM10m/RM25m to its bottomline in 2019F/2020F, based on our 6.5% net margin assumption.

• The contract made up 52% of our 2019F orderbook target and brings outstanding orderbook to RM6bn. We expect most to come from Sunway Group.

• Downgrade to HOLD with unchanged TP of RM1.60 as share price has rallied since our initiation in Jan 2019. We like the stock given good cash position, 3 years of earnings visibility and steady job flows from Sunway Group.

First contract in the year

SunCon secured construction works contract from TNB worth RM781m for the TNB HQ campus Phase 2 development - Project Platinum. As reported by NST on Sep 2018, Suncon was shortlisted alongside two other contenders, AZRB and Pesona Metro.

Significant contribution in 2019F/20F

Based on our net margin assumption of 6.5%, we expect this job will contribute RM10m and RM25m or 7% and 18% of its 2019F and 2020F bottomline respectively. The project is expected to be completed within 26 months.

Exceed 50% of orderbook target

With this win, it has met 52% of our orderbook target and brings outstanding orderbook to RM6bn. This provides earnings visibility of up to 2021F. We expect more job wins in coming months mainly from Sunway Group’s property and commercial development as the overall infrastructure outlook remains muted given on-going fiscal restructuring by the Federal government.

Downgrade HOLD with RM1.60 TP

Downgrade to HOLD (from Buy) with an unchanged RM1.60 SOPderived TP. Its shares price has rallied by 23% since our initiation in Jan 2019, limiting upside. Still, we like the stock given its good net cash position (25sen per share), 3 years earnings visibility and steady job flows from Sunway Group. Buy on dips.

Source: BIMB Securities Research - 20 Feb 2019