SunCon's JB-SG RTS contract win a positive surprise

KUALA LUMPUR: Sunway Constructions Bhd's (SunCon) maiden contract win involving a letter of award for the Johor Bharu-Singapore Rapid Transit System (RTS) project serves as an unexpected upside given it was not included in the management's contract guidance for FY23.

SunCon yesterday announced it had secured the contract for Package 1B and Package 5 of the porject amounting to RM604.9mil.

The contract, to be executed over 26 months with an expected completion date in 2Q25, includes advance works for stations and viaducts under Package 1B and construction of terrestrial viaducts and ancillary structures under Package 5.

Hong Leong Investment Bank (HLIB) research said it was positively surprised by the contract win given it had attached a low probability SunCon would bag the job due to stiff competition.

The research firm said the guided construction earnings before interest and tax (Ebit) margins are generally 5% to 8%, which it said was manageable.

It also does not see any execution risks from the project considering the packages are for the landed portion of the RTS with no marine elements, while SunCon has vast experience in railway construction.

"The RTS win does not form part of SunCon’s contract win guidance in FY23.

"In the near term, we are expecting award conversion from its parent-co projects before the Vietnam power plant (RM6bil) and Mass Rapid Transit 3 (RM1.2bil WPC) opportunities become clearer in 2HFY23," it said in a note.

HLIB maintained its "buy" recommendation with unchanged target price of RM1.94.

It said it likes the company due to its safer exposure to future infrastructure project rollouts, strong support from its parent company and it is poised to enter stronger earnings cycle driven by fresh contract wins.

Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

Next In Business News

Oil prices rise as US closes in on debt deal
IOIProp Q3 net profit up to RM115mil
US dollar rise puts pressure on ringgit
SOBA continues to shape new possibilities
Mounting challenges, some bright spots
Malaysia’s high-income goal – motivational or unrealistic?
Managing change in modern banking
Pos Malaysia draws interest
Short Position: Sugary matters, Virtual power purchase agreements,
Inflation figures moderate slightly in April

Others Also Read