SUNCON has been awarded the MRT Line 2 (Sungai Buloh-Serdang-Putrajaya line) station works package S201, with a contract sum of RM212.3mn.

The work packages is for the construction and completion of elevated stations and other associated works at Damansara Damai, Sri Damansara West and Sri Damansara East.

Our View

This is the fourth works package SUNCON has secured from MRT Corp, after it had secured works package V4 of MRT Line 1, and works packages V201 and advance work between Kampung Muhibbah and Serdang Raya 4 of MRT Line 2.

YTD, SUNCON has secured RM661mn of new jobs, versus the management’s target of RM2.0bn for FY17. Earlier in January, SUNCON has secured a building job from its parent company for the property development at Kelana Jaya. We estimate that the outstanding order book currently stands at RM4.5bn.

We are positive on the job win as we understand that the successful bidder of this package would be the nominated sub-contractor for viaduct works package V201, which was also secured by SUNCON. This allows SUNCON to share resources for both works packages, to save in mobilization of construction team, as well as reducing the hassle in site coordination and interfacing works.

Assuming a PBT margin of 6%, we expect the project to contribute RM9.7mn to the bottom line, or 0.7sen/share throughout the construction period.

Impact

No change to our earnings forecasts as the job win is within our FY17 order book replenishment assumption of RM2.0bn.

Valuation

We maintain our HOLD call on SUNCON with a target price of RM1.90, based on unchanged 15x CY17 earnings.

Source: TA Research - 13 Mar 2017