SUNCON has secured 3 construction contracts. They are:

i) Proposed Engineering, Procurement, Construction and Commissioning at Gas District Cooling Plant 1 at Precinct 1, Putrajaya, for a total contract sum of RM152.4mn. Sections 1 and 2 of the works start on 27 March 2017 and are to be completed by 26 December 2017 and 27 August 2018 respectively;

ii) Bore piling works for Sungai Besi – Ulu Kelang Expressway (SUKE), Section B – Cheras to Ulu Kelang, Package CB1, for a total contract sum of RM18.1mn. The project shall commence on 15 May 2017 and is expected to be completed on 30 April 2018; and

iii) Bore piling works for Damansara – Shah Alam Expressway (DASH), Section A – Puncak Perdana to Kota Damansara, Package CA1, for a total contract sum of RM15.8mn. The project shall commence on 23 March 2017 and is expected to be completed on 16 January 2018.

We estimate that SUNCON has secured approximately RM900mn of new jobs YTD, versus our FY17 order book replenishment assumption of RM2.0bn, which is in line with management’s FY17 full-year target of RM2.0bn.

With these job wins, the group’s outstanding order book improves to RM4.9bn, translating into 2.7x FY16 revenue. This would provide earnings visibility to the group for the next 2 to 3 years.

Impact

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

Valuation

No change to our target price of RM1.90, based on unchanged 15x CY17 earnings. Given the limited upside following the recent run-up in share price, we downgrade the stock from BUY to HOLD.

Source: TA Research - 27 Mar 2017