• SunCon secured 3 construction works worth a total of RM497m for 20-34 months project duration. We expect this would add c.RM16m p.a. net profit based on 6.5% net margin assumption.

• Overall, orderbook secured for 2019 totaled RM1.54bn, ahead of our earlier assumption. We raise our estimates by 15%-24% for 2019-21F on higher orderbook assumption ofRM1.8-2.0bn.

• We believe it would secure more domestic projects for 2019 on the back of ECRL, LSS3 and other internal projects within the group while tendering overseas projects.

• Maintain HOLD with a higher RM2.15 TP. It commands solid fundamental with a net cash position and c.RM6.2bn outstanding orderbook which could provide 3 years of earnings visibility.

Three birds in one stone

SunCon secured 3 construction works worth a total of RM497m, which are: i) RM310m Petronas Leadership Centre in Bangi for 20 months, ii) RM119m piling works of Parcel CP2 for Sunway mixed development project in Bandar Sunway for 21 months, and iii) RM68m electrical works of Oxley Project at Jalan Ampang for 34 months. We believe this adds c.RM16m p.a net profit based on 6.5% net margin assumed.

Ahead RM1.5bn orderbook

Including these projects, total orderbook secured in 2019 amounts to RM1.54bn, which exceeds our RM1.5bn assumption. We raised our orderbook assumptions for 2019F to RM1.8bn (from RM1.5bn) as there is another 6 months. We also expect the job awards momentum to steadily pickup over 2020F/21F and raise orderbook assumptions to RM1.9bn/RM2.0bn respectively. This implies 15%-24% increase in our 2019-21F estimates (Table 1).

Prospect looks promising on both domestic and overseas.

We believe SunCon would meet our new orderbook assumption on the back of ECRL and LSS3 as it has expressed interest to participate in these projects. Meanwhile, it is also tendering for jobs overseas mainly in Myanmar and India. To recap, it entered into an MOU with Capital Construction Limited (CCL) in Myanmar in Apr 2019 to jointly bid for internal mixed development projects for the next 3 years.

Maintain HOLD with RM2.15 TP

Maintain HOLD with a higher SOP-derived TP of RM2.15. We continue to like the stock for its solid fundamental with c.RM6.2bn outstanding orderbook providing earnings visibility for the next 3 years and its solid net cash position. Accumulate on dips.

Source: BIMB Securities Research - 1 Jul 2019