KUALA LUMPUR: Sunway Construction Bhd remains Affin Hwang Capital research's top mid-cap construction Buy pick with an increased target price of RM2.24 from RM2 previously.
"SunCon is a potential beneficiary of projects to be revived such as the MRT3, Penang LRT and East Coast Rail Link.
"We raise our 2020E RNAV/share estimate to RM2.49 from RM2.24 previously to reflect a higher construction PER of 16x (14x previously) and higher net cash at end-1Q19," the research house said in a note.
In its recent earnings results, SunCon posted net profit of RM31mil in 1Q19, which comprised only 20-21% of both the research house's and consensus 2019 full-year forecasts.
According to Affin Hwang slow progress billings and completion of several projects in the previous year led to revenue falling 17% year-on-year and 30% quarter-on-quarter to RM440mil in 1Q19.
However, SunCon is seeing good order book replenishment with RM1bil worth of new contracts including the RM781mil TNB HQ campus development.
"It is on track to meet its 2019 RM1.5bn new contract target, which we have assumed in our earnings forecasts," said Affin Hwang.
Meanwhile, SunCOn has submitted tenders valued at RM7.4bil including road/railway projects in India, piling projects in Singapore and hospitals for Sunway.
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