PETALING JAYA: Sunway Construction Group Bhd
(SunCon) is entering an era of data centre (DC)-powered growth, with nearly half of its existing order book made up of DC-related works.
According to UOB Kay Hian (UOBKH) Research, about 75% to 80% of SunCon’s tender book worth between RM15bil and RM16bil is also DC-related.
In a recent note, the research house raised its earnings forecasts for SunCon’s financial year 2026 (FY26) and FY27 by 2% to 3%.
“Overall, we assess that SunCon is in a good position to win one or two more DC bids within 2025.
“This will lift the group’s overall margins, given a DC’s shorter construction period and better profit margin,” it said in a note.
More importantly, said UOBKH Research, SunCon guided that all existing DC projects are progressing without delays, allaying earlier concerns about the withdrawal of tenders and potential halts following artificial intelligence chip restrictions imposed by the United States.
Last week, SunCon announced it had accepted work orders from a US-based multinational technology company for two DC projects with a total contract value of RM1.16bil.
Assuming a typical pre-tax profit margin of 5% to 8% (which is higher than residential projects), the total earnings accretion to SunCon is estimated at RM58mil to RM81mil, spread over 2025 to 2027, said UOBKH Research.
With this project win, SunCon’s order book has strengthened to RM7.9bil, with DC projects alone worth RM3.93bil.
The group’s total order book provides earnings visibility until FY28.
According to MIDF Research, SunCon’s management continues to guide for further wins, supported by a healthy pipeline of commercial, infrastructure and Advanced Technology Facilities-related projects.
“Notably, the latest contract further underscores SunCon’s ability to diversify beyond Sunway Bhd-related jobs, supporting a more balanced mix between external and in-house projects.
“This diversification helps smoothen earnings cyclicality while enhancing its competitiveness as a standalone construction player,” it said.
Bullish on the stock’s outlook, MIDF Research raised its earnings forecasts for FY25, FY26 and FY27 by 14%, 10.6% and 11.3%, respectively.
The revision reflects the continued pace of high-value job wins, particularly in the DC segment.
“While we had expected this latest contract to materialise, the swift execution and cumulative scale of wins – particularly from external clients – reinforce the strength of SunCon’s operating momentum.
“SunCon’s ability to ride this structural wave – backed by five ongoing DC projects and a robust tender pipeline – reinforces our conviction that it is set to remain a key beneficiary of this thematic for the next two to three years,” the research house added.
Meanwhile, Kenanga Research pointed out that SunCon is actively tendering for several more DC projects, which, if secured, could further enhance its “blended profit margins”.
Additionally, the company is pursuing opportunities in Penang Light Rail Transit Packages 2 and 3, as well as in-house projects within the Sunway Group.
With SunCon’s share price having surged 19% over the past 10 days in anticipation of these wins, Kenanga Research believes the positives are largely priced in.
“Accordingly, we downgrade the stock to ‘market perform’ with an unchanged target price of RM5.94,” it said.
SunCon’s stock closed at RM5.90 per share on May 30.
