SunCon announced that it has been awarded two piling contracts with combined value of RM86.4m. The awards consist of piling jobs for LRT3 GS10 package and proposed TOD development at Putrajaya. Both contracts are expected to be completed in 2020. YTD job win stands at RM867.7m and outstanding orderbook currently stands at RM6.1bn which translates to 2.7x cover on FY18 revenue. Maintain forecast. Maintain HOLD rating with unchanged TP of RM1.81 derived from 16.5x P/E multiple on FY19 earnings.

NEWSBREAK

2 piling contracts. SunCon announced that it has been awarded two piling contracts with combined value of RM86.4m. The awards consist of: (i) bored pile works for LRT3 Package GS10 from Bandar Utama to Johan Setia and is expected to be completed on 24 March 2020 and (ii) earthwork, piling and associated works for the proposed transit oriented development at Plot 7MD7, Precinct 7, Putrajaya and is expected to be completed on 24 July 2020.

HLIB’s VIEW

Adding on more. This is the second and third job win of the year which brings the YTD sum to RM867.7m. Total outstanding orderbook currently stands at c.RM6.1bn which translates to 2.7x cover on FY18 revenue. Looking ahead, we expect more jobs to come from its parent-co Sunway going forward due to reduction in government spending on public infrastructure projects and continued slowdown of property market which results in less building jobs from external developers.

Exploring foreign ground. Given the slowdown of domestic construction industry, SunCon is actively exploring for regional opportunities particularly in India and ASEAN region. The company will collaborate with foreign partners in contract bidding to take advantage of local expertise.

Forecast. Maintained as YTD job win is still within our FY19 orderbook replenishment target of RM1.5bn.

Maintain HOLD, TP: RM1.81. Maintain HOLD with unchanged TP of RM1.81, based on an unchanged 16.5x PE multiple tagged to FY19 earnings. While we like SunCon as a well-managed contractor, we reckon that valuations are fair at current levels.

Source: Hong Leong Investment Bank Research - 21 Mar 2019