• Sunway Construction (SunCon) marked YTD new order wins of RM831mn with construction works of Sunway Ipoh Mall, Data Center Early Contractor Involvement Services (ECI) work orders and Precast Job.

• We hold a bullish view, considering the promising opportunities in infrastructure and construction projects, position SunCon well to meet its order book target of RM2.5bn-RM3.0bn for FY24.

• Maintain SunCon as a BUY with TP of RM2.88. We believe their diversified portfolio, consisting of both external and internal orders, has laid a favourable groundwork for positive earnings.

Bright Start for 1QFY24

SunCon has secured a contract valued at RM720.98mn from Sunway Lost World Water Park Sdn Bhd, an indirect subsidiary of Sunway Bhd, through related party transaction. This has contributed to SunCon's new orderbook replenishment, which now stands at RM831mn. The contract encompasses piling, earthworks, sub-structure, and main building works for the proposed development of a commercial block in Hulu Kinta, Perak. The block includes a six-floor shopping complex, cinema, and carpark which we believe situated within the 1,350-acre integrated township of Sunway City Ipoh owned by Sunway Group. Scheduled to begin construction in March 2024 and anticipated to conclude by January 2027, the mall is expected to have a favourable impact on earnings for FY24. This project providing an exceptional retail experience at the heart of Perak and further complementing the existing development in Sunway City Ipoh.

Orderbook Blossoms with a Mix of Projects

In addition to Sunway Ipoh Mall, the YTD orderbook wins include Data Center ECI work orders totaling RM6.8mn and Precast Job amounting to RM103.4mn. These wins further bolster the company's existing robust orderbook of RM5.3bn, which poised to contribute to earnings over the next 3-4 years. We expecting the upcoming orderbook replenishment to be driven by the rollover of mega infrastructure projects, positive demand in the precast segment from Singapore House Development Board (HDB), and opportunities in the data center, warehouse logistics, and renewable energy sectors. In light of these catalysts, we have set an internal orderbook target of RM2.5bn for FY24. This target will be further supported by internal projects ranging from RM100-200mn each.

Maintain BUY with TP RM2.88

We maintain SunCon as a BUY with TP of RM2.88 based on FY24F EPS of 12.5sen and PER of 23x. We continue to like SunCon due to: (i) strong tenderbook in the pipeline (RM26.2bn), ii) strong support from parent company, and (iii) beneficiary from healthy precast demand.

Source: BIMB Securities Research - 22 Feb 2024