SunCon’s outstanding order book stands at RM5.3bil a of end-2022.
PETALING JAYA: Sunway Construction Group Bhd
’s (SunCon) earnings visibility could extend to financial year ending Dec 31, 2026 (FY26) if the engineering, procurement and construction (EPC) agreement in relation to the Song Hau 2 Thermal Power Plant project in Vietnam materialises.
SunCon’s stake in the consortium, which inked the EPC agreement early this month, is 55%.
The EPC agreement, which is now valued at US$2.42bil (RM10.9bil) implies around RM6bil in order book replenishment for SunCon, according to Maybank Investment Bank (Maybank IB) Research , adding that the deal will double SunCon’s outstanding order book of RM5.3bil as at end-2022.
The brokerage noted that SunCon’s outstanding order book of RM5.3bil as at end-2022 would provide earnings visibility into FY24.
“SunCon’s job win target for FY23 is RM2bil, as compared to the RM2.6bil achieved in FY22, before including Song Hau 2,” Maybank IB Research wrote in its report yesterday, adding that it had assumed a job win of RM2.5bil for FY23.
“Its active tender book now is RM21.3bil, which includes two Klang Valley Mass Rapid Transit Line 3 civil works main packages in joint ventures. SunCon had also participated in the pre-qualification for Bayan Lepas light rail transit.
“In addition, it targets higher precast wins, as compared to RM168mil achieved in FY22, supported by the start of operation of its new integrated construction and prefabrication hub plant in Singapore in the first quarter of FY23 (1Q23),” it explained.
Maybank IB Research raised its target price for SunCon to RM1.73 from RM1.58 previously, while maintaining its “hold” call on the counter.
The revised target price was based on a higher valuation of 16.5 times the estimated price-earnings ratio for FY23, as compared to 15 times previously, to reflect the potential of higher targeted order book replenishment this year.
“We continue to like SunCon for its strong execution capability,” Maybank IB Research said.
It noted that while SunCon remained in net cash at end-FY22, it expected the company’s balance sheet to turn 0.5 times net gearing at end-FY23. This was due to the construction progresses for SunCon’s two India hybrid annuity model projects, targeted for completion in 3Q23 and 4Q23, and two large-scale solar projects, which were on deferred payment, due for completion in 3Q24.
“This may inhibit its involvement in private finance initiative or deferred payment projects in the interim,” Maybank IB Research said.
SunCon’s net profit rose 20.1% to RM135.2mil in FY22 from RM112.6mil in FY21 in tandem with higher revenue. During the year under review, the company’s revenue increased 24.6% to RM2.16bil from RM1.73bil in FY21, lifted by both the construction and pre-cast segments.
