SunCon to get support from Sunway

In a statement to Bursa Malaysia, SunCon said its subsidiary Sunway Construction Sdn Bhd it accepted a letter of acceptance worth RM23.17mil from Tenaga Nasional Bhd to conduct piling works for the TNB Campus in Kuala Lumpur

PETALING JAYA: Despite underwhelming growth estimates and a waning property sector, Sunway Construction Bhd (SunCon)’s order book replenishment is expected to be supported by job awards from the Sunway Group.

The Sunway group has 3,283-acre of land bank with a gross development value of RM54.4bil.

According to an initial coverage report by BIMB Securities Research, SunCon’s downside risk is limited by Sunway Group’s township development projects, ensuring that SunCon has a sustainable job flow in the near to medium term.

The group also has a diverse development portfolio which could provide an edge amidst the weak property market.

Revenue contribution from the construction segment is expected to grow by 7.8% and 0.4% over 2018 and 2019 before easing 5.8% in 2020.

“This is due to lower order book replenishment rate assumed at RM1.5bil per annum.

“Outstanding order book is currently worth RM5.7bil.

“We also factored in a 30% haircut for the LRT3 contracts into it annual progress billings as we take a more conservative stance amidst cost optimisation by the federal government on the infrastructure project,” said BIMB Securities Research, adding that revenue from precast is expected to improve on better demand from Housing and Development Board units in Singapore.

However, precast segment margins could come under pressure from high material costs and competition.

It has been a challenging year for SunCon to secure new external orderbook in 2018, amidst the backdrop of regime change and revision of costs or scope on major projects.

Nevertheless, it has met its annual new order book target of RM1.5bil, thanks to Sunway Group’s contract awards worth RM1.2bil.

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