Sunway Construction Group Bhd (SunCon) closed at the all-time historical high of on Feb 2 on the back of a higher trading volume. It rose 8.9% to RM2.45 versus the previous’ day closing price. 

This likely indicates that the next wave up may be underway with follow-through buying lifting prices up to test RM2.36 and the RM2.50 psychological level next. In the past year alone, the counter had surged 47.6%. It was trading at a low of RM1.53 in June last year.

The construction sector gained 31.5% and saw YTD uptick of 7.48% on the Bursa Malaysia Construction Index. Its top five constituents are Gamuda Bhd, IJM Corp Bhd, SunCon, WCE Holdings Bhd and Kerjaya Prospek Group Bhd.

HLIB Bhd has upgraded the construction sector to overweight from neutral as the public project contract flows to boost contract awards beyond the current level of about RM20 billion.

Meanwhile, more upside to the construction sector is expected should the Kuala Lumpur-Singapore high-speed rail (HSR) project be revived. The project could potentially cost RM100 billion.

There is also renewed excitement in infrastructure and property developments in Johor, following the installation of Sultan Johor as the new Yang di-Pertuan Agong.

Similarly, AmInvest remains “overweight” on the construction sector, on the recovery of job flows in the first half of 2024 underpinned by a stable government and improving operating margins that are further catalysed by prolific overseas jobs.

Among the big-ticket projects that are expected to be rolled out in 2024 are the RM15.7 billion Pan Borneo Sabah Phase 1B, flood mitigation packages worth RM11.8 billion, the RM10 billion Penang LRT project.

There are major contracts to be dished out including the Sabah-Sarawak Link Road (RM7.4 billion) and reinstatement of the Light Rail Transit 3 (LRT3) stations (RM4.7 billion)  SunConstruction should be one of the main beneficiaries of the uptick in the construction sector.

For 3QFY23, its net profit rose to RM35 million from RM22.7 million a year ago while revenue jumped to RM673.5 million from RM469.2 million. The higher turnover recorded in the current quarter was due to the accelerated progress in the newer projects. 

However, profit margin for corresponding quarter of the preceding financial year was higher due to reversal of provision for a legal case. SunCon's outstanding order book now stands at RM5.8 billion versus Dec 2022’s RM5.3 billion, with RM2.2 billion new order secured up to September 2023.

It is probably a good time to accumulate the shares given the positive outlook as the construction sector takes a turn for the better.