We like Sunway Construction for its track record in the mass rapid transit segment and earnings visibility, backed by a MYR3.7bn construction order backlog and recurring jobs from its parent and key blue-chip clients. We also expect its precast concrete business to continue delivering attractive margins. BUY, with a MYR1.58 TP (from MYR1.53, 13% upside) as we lift our earnings estimates for the next two years by 3.0% and 3.6% respectively.

Strong orderbook. Sunway Construction’s earnings visibility is strongly backedby: i) an outstanding order backlog of MYR3.7bn, of which ~90% is fromconstruction. The rest is from precast concrete products that may keep the firmbusy for next two years, ii) recurring orders from its parent Sunway (SWB MK,BUY, TP: MYR3.60) and key blue-chip clients comprising KLCC/Petronas,Khazanah, Putrajaya Holdings, MRT Corp and Prasarana that are engaged inmassive long-term projects – developing townships, mass public transportsystems, a new economic zone and an administrative centre, and iii) a highlyprofitable precast operation in Singapore. Meanwhile, its FY15 results werelargely in line with our/consensus estimates.

Forecasts and risks. This report marks the transfer of coverage to Ng SemGuan. As we adopted a new financial model, our FY16F/FY17F earnings arerevised up by 3.6%/3.0% respectively. We also introduce our FY18 projection.Key risks include new job wins falling short and weaker-than-expected margins.

Reiterate BUY. As it has a strong outstanding orderbook with a decent pipelineof projects up for tender, we are keeping our BUY call on Sunway Constructionwith a slightly higher TP of MYR1.58. We continue to value the company basedon 14x revised FY16F EPS, in line with our benchmark upcycle 1-year forwardtarget P/E of 14x for mid-cap construction stocks.