PETALING JAYA: Sunway Construction Group Bhd
(SunCon) may see its order wins for the financial year ending Dec 31, 2026 (FY26) exceed expectations, driven by a robust data centre (DC) pipeline and potential upsizing of existing DC projects, according to CGS International (CGSI) Research.
Following an engagement with the group, the research house said SunCon’s RM6bil order win target for FY26 remains intact, with year-to-date wins of RM1.2bil as at April.
The group recorded RM5.2bil in contract wins for FY25.
CGSI Research noted that about 80% of SunCon’s RM17.5bil tender book continues to be driven by DC-related jobs, reflecting sustained demand from hyperscale operators.
“We believe that SunCon’s FY26 order win target could surprise on the upside if some near-term DC wins come to fruition in the second quarter (2Q26) and the conversion of the larger DC upsizing for an existing Johor-based hyperscale data centre project (JHB1XO Building 2) is awarded in the second half of this year,” it said.
The research outfit added that the upsizing for existing DCs itself may total RM4bil to RM4.5bil.
“There is tighter contractor capacity now and with its completion of 156MW of DC capacity to-date, we think SunCon stands out as a strong DC contractor.”
CGSI Research also highlighted that construction costs for new DC tenders have risen to the upper range of US$8mil to US$12mil per MW.
Despite this, it said SunCon appears well-positioned to protect its margins, with about half of its order book structured on a cost pass-through basis.
As at March 2026, SunCon’s outstanding order book stood at RM6.9bil, comprising 51% DC projects, 35% internal jobs and 14% from other segments, including buildings, infrastructure and precast.
“SunCon disclosed that about 50% of its order book is on a cost plus basis and hence margins should be relatively intact,” CGSI Research noted.
While almost all internal projects are on a cost-plus structure, the research firm said about 60% of DC jobs are fixed-price contracts.
This could expose the group to cost fluctuations, particularly from diesel price movements affecting early-stage piling works and late-stage testing and commissioning.
However, CGSI Research said the group still had sufficient buffers to maintain margins.
This is supported by potential cost renegotiations if input prices escalate further.
It also pointed out that SunCon benefits from a strong client base, with minimal payment risk as its DC projects are backed by large US hyperscalers.
“Its strong balance sheet with a net cash of RM1.7bil at end-December 2025 (RM1.28 per share) should also help it weather any potential slowdown,” it said.
“SunCon’s construction margins were in the range of 7% and 9% from 1Q22 to 4Q25, apart from 4Q25 when it reached 17% due to the handover of its Sedenak DC project.”
CGSI Research said SunCon remains committed to its 100% dividend payout for FY26, which will be distributed on a quarterly basis.
The research house reiterated its “add” call on the stock with an unchanged target price of RM7.90 a share.
