Subsequent to the media release by MRT Corp last Friday and our report dated 13 March 2017, SUNCON announced that it has signed the Letter of Acceptance issued by MRT Corp in respect of Package S201 of MRT Line 2, the construction and completion of elevated stations and other associated works at Damansara Damai, Sri Damansara West and Sri Damansara East, for a contract sum of RM212.3mn

The works include foundation works, civil and structural works, architectural, building works, finishes, electrical and mechanical works and interfacing with system works. The package shall be completed by 30 September 2020.

Clarification from the Management

The management clarified that S201 is a nominated subcontract of V201. As such, this award will not increase its order book but will enhance the overall margin of V201. YTD, SUNCON has secured RM496mn of new jobs, versus the management’s target of RM2.0bn for FY17.

Impact

Maintain.

Valuation

We upgrade the stock to a BUY as value reemerges after the share price retreated from an all-time high of RM1.81 recorded last month. Maintain our target price of RM1.90, based on unchanged 15x CY17 earnings

Source: TA Research - 14 Mar 2017