PETALING JAYA: CGS International (CGSI) Research expects Sunway Construction Group Bhd
(SunCon) to win more data centre (DC) jobs in the first quarter of the year from the upsizing of its two existing projects.
This was following SunCon bagging a RM1.5bil Rapid Transit System Transport-Oriented Development (RTS TOD) contract at Bukit Chagar, Johor.
It is the company’s first large win for the financial year 2025 (FY25), bringing its order book to RM7.5bil as at March 2025.
The research house pointed out that there will also be other components of the RTS TOD such as the 300-room, five-star hotel and service apartments which will be launched later, with the whole development slated for completion by 2033.
“This will give SunCon further orderbook opportunities later, in our view,” it said.
CGSI Research estimated the pre-tax margin for this project at 8%, at the higher end of its 5% to 8% guidance given that it is a commercial project with design element.
It added that the win also reduces SunCon’s exposure to DC projects to 44% of its RM7.5bil order book from 55% in December 2024.
“However, we expect the percentage to increase with the potential upsizing of two existing DC projects in its current order book, for which we anticipate an award by the first quarter of 2025.
“In its conference call last month, SunCon still had a positive tone on DCs, indicating that there are six tenders for new clients and upsizing opportunities within present DC projects,” the research house said.
The RTS TOD project will involve the construction of a multi-storey park and ride building for the RTS TOD, drop-off and pick-up facility, immigration customs and quarantine complex connection, the perimeter ring road and retaining walls.
The other portion of the project will involve the construction of a retail mall, podium and the top side property at Bukit Chagar station.
SunCon’s new order win target for FY25 remains at RM4.5bil to RM6bil versus FY24’s RM4.2bil.
“This factors in DC projects, precast and internal projects, and no government infrastructure projects.
“We estimate that SunCon will need to clinch half of this target (RM2.25bil to RM3bil) by the first half of FY25 to ensure there is earnings continuity through to FY26, given its burn rate of RM1.2bil to RM1.3bil per quarter,” CGSI Research said.
It maintained its “add” rating with a target price (TP) of RM5.70 and it favours SunCon for its strong execution track record, first-mover advantage in DCs and three-year earnings per share compound annual growth rate of 27% (FY24 till FY27).
Similarly, RHB Research has kept its “buy” call on the counter with a TP of RM5.63, following the RTS TOD project win.
“Our TP implies a 22.8 times FY26 price/earnings, in line with comparable large-cap contractors with DC exposure.
“This is justified by SunCon’s current position as the public-listed contractor with 50% of its order book from DCs – the highest percentage among its peers.
“This is also in addition to its above-industry return on equity, coupled with steady job prospects from its parent which has a strong presence in Ipoh and Johor,” it said.
