KUALA LUMPUR: Affin Hwang maintained its buy rating on Sunway Construction Bhd with an unchanged target price of RM2.45 following lower-than-expected 1Q18 earnings.
The research house said the construction company's 1Q18 net profit of RM36mil came to 20% of its and consensus expectations.
"Core net profit declined 2% yoy to RM33.5m, but a one-off arbitration gain of RM1.8m for its past completed project in Trinidad & Tobago lifted its net profit in 1Q18," it said.
Revenue grew 26% on year to RM529mil on the back of its construction segment while the precast concrete segment remained a drag.
Profit before tax (PBT) in the construction segment jumped 103% on year to RM40mil in the quarter as progress billings accelerated on its order book while the PBT margin was sustained at 8.2%, said Affin Hwang.
However, precast concrete PBT contracted 85% on year to RM3.6mil due to longer delivery periods on its existing order book, while PBT margin was impacted by higher steel bar prices in 1Q18 compared to the year-ago quarter.
According to Affin Hwang Research, year-to-date, Sunway Construction has secured RM542mil in new contracts while it also pans to bid for the five planned Sunway hospital projects and LRT Penang.
"We reduce our new contract assumption to RM1.5bn in FY18 from RM2bn previously in anticipation of delays in government infrastructure project roll-outs," it said.
Limited time offer:
Just RM5 per month.
