PETALING JAYA: The ramp-up in progress of existing projects as well as new job wins driven by new opportunities in the sustainable energy segment is expected to support Sunway Construction Group Bhd’s (SunCon) earnings growth, going forward.
RHB Research expects the construction company’s second-quarter 2023 (2Q23) core earnings to grow in the range of RM30mil to RM40mil from RM26mil in 1Q23, underpinned by the ramp-up in progress of projects that were in their early stages during 1Q23.
“The group’s potential involvement in the Song Hau 2 power plant in Vietnam plus strong data centre demand in Malaysia may mitigate any downside risks from the local construction sector,” the research house said in a report yesterday.
Apart from civil and infrastructure construction services, SunCon provides specialised foundation and geotechnical engineering services as well as mechanical, electrical and plumbing services.
Given that SunCon’s RM1.7bil data centre job in Johor (about 30% of outstanding order book) just commenced works following the contract award in December last year, the group’s core profit dropped by 44% quarter-on-quarter (q-o-q) in 1Q23.
“Despite some delays in the issuance of second and third notices to proceed by the client, this job is still well on track to be completed by the end of 2024, as project works ramped up over 2Q23,” RHB Research said.
The research house said the group’s jobs related to the sustainable energy segment make up about 7% (RM420mil) of its total order book (via five contracts).
As at the end of 1Q23, the job to construct a 50MW solar power plant in Perak for Gopeng Bhd has the largest outstanding order book value of RM166mil.
“The National Energy Transition Roadmap (NETR) may bring further opportunities in the form of engineering, procurement, construction and commissioning jobs for solar power plants, as a renewable energy zone has been earmarked as one of 10 flagship catalyst projects.
“The NETR’s 10 flagship catalyst projects should generate a projected total investment of more than RM25bil,” RHB Research said.
Additionally, the Song Hau 2 power plant project in Vietnam worth RM6bil is awaiting financial close, likely by September or October, which could drive SunCon’s financial year 2024 (FY24) to FY25 earnings by 30% to 35%.
“Overall, we expect its job replenishment to remain steady, backed by its parent – note that 56% of its RM1.5bil year-to-date new job wins came from its parent,” RHB Research said.