KUALA LUMPUR: Sunway Construction Group Bhd
(SunCon) remains optimistic of securing new domestic contracts in 2019 despite the slower roll-out of government and private sector projects.
The property developer has achieved its new contracts target of RM1.5bil in 2018 and expects to secure another R1.5bil in 2019.
It has submitted RM6bil worth of tenders for local and overseas projects.
In a Wednesday report, Affin Hwang Capital research said in-house jobs are expected to contribute to about 30% of the 2019 contract target as Sunway continues to launch new property projects and expand its hospitals.
Meanwhile, the research house believes SunCon is the frontrunner for the RM700mil Tenaga headquarters redevelopment projects as it is currently undertaking the piling works at the site.
"It has also submitted tenders for government hospital projects (no opportunities previously as open tenders were not carried out by the previous administration) and will bid for the RM5.2bn Klang Valley Double-tracking packages," it said.
Affin Hwang believes the government's review of public-sector works will likely lead to a reduction in SunCon's subcontract values and scope of works for the RM1.2bil Klang Valley MRT Line 2 and RM2.2bil LRT Line 3 projects.
"Suncon is looking to complete negotiations with the main contractors of the projects by end-2018 on the revised contract value and designs.
"We have assumed a reduction of 23% for the MRT2 and 30% for the LRT3 contracts (total reduction of RM0.9bn) in our EPS forecasts," it said.
SunCon is also pursuing international projects in India and Southeast Asia given the slow rollout of domestic infrastructure projects, said the research house.
In its outlook on the construction sector, Affin Hwang said it remains challenging but SunCon's remaining order book of RM5.2bil provides good earnings visibility.
"We believe Suncon is more resilient than most of its peers as it is in a net cash position (RM0.25/share), has an asset-light model (not involved in the property business), integrated construction capabilities, and is competitive in open tenders with its excellent track record."
It maintained its buy call on the counter with an unchanged target price of RM2.
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