KUALA LUMPUR: Affin Hwang Capital research revised its earnings forecast for Sunway Construction Bhd on the back of delays to its construction earnings recognition and a disappointing 1H19 result.
For FY19, the research house cut core EPS by 7% but raised FY20 and FY21 core EPS by 2% each.
It maintained its top mid-cap sector buy call on SunCon and raised its target price slightly to RM2.25 from RM2.24 based on a 10% discount to 2020E RNAV.
Affin Hwang said SUnCon's net profit of RM64mil in 1H19 was 10% lower year-on-year and comprised only 42% and 44% of consensus and its full-year forecasts.
The weaker performance was due to revenue falling 19% on slow construction progress billings and lower revenue from its precast concrete operation, as well as the reduction in contract value for the Klang Valley MRT Line and LRT3.
"There were also low progress billings for the LRT3 and some building projects due to design changes," said the research house.
Meanwhile the precast concrete division only broke even due to lower profit margins for legacy conctracts that will mostly complete in 3Q19.
Year to date, SunCon was secured RM1.54bil worth of new contracts, including the RM310mil Petronas Leadership Centre.
The group's remaining order book has increased to RM5.8bil, which is equivalent to 2.6x FY18 revenue.
Moving forward, SunCon has submitted tenders for road/railway projects in India, piling projects in Singapore, hospitals for Sunway and domestic Large Scale Solar 3 projects.