PETALING JAYA: Sunway Construction Group Bhd
’s (SunCon) outlook is undimmed despite the volatile macro landscape as the company remains bullish on data centre (DC) projects supported by a tender book of RM15bil to RM16bil.
Hong Leong Investment Bank (HLIB) Research, which recently met with SunCon’s management, said the company sees no signs of a slowdown in DC-related tenders. “In fact, activity has accelerated in recent months despite macro uncertainties,” it said.
It has maintained a “buy” call on the stock with an unchanged target price of RM9.10 a share, with the valuation justified by the company’s positioning vis-à-vis the DC theme, robust execution capabilities with solid margin delivery, and superior return-on-equity alongside a palatable dividend yield of 4.5%.
SunCon shared it had recently secured some small projects totalling RM400mil, bringing year-to-date wins to RM3.4bil and outstanding order book to RM9.1bil or 1.7 times financial year ended Dec 31, 2025 (FY25).
The research house sees potential for the company to upsize contracts in the recently secured projects, due to incumbency and familiarity with site conditions. This followed a recent conversion of an RM1.7bil new DC order from a US multinational company (MNC).
“In the near term, we expect high-certainty conversions to be driven by repeat clientele, through successive build-out of existing DC campus and mechanical, electrical and plumbing packages for ongoing DC projects,” HLIB Research said.
It estimates these opportunities at RM4bil, which supports the forecast for SunCon’s FY26 total new order contract assumption of RM8bil, versus the company’s RM6bil target.
The RM1bil pipeline from parent Sunway Bhd would be driven by transportation and hospital expansion.
The research house expects SunCon’s margins to stay elevated in FY26 as a portion of the company’s order book has been negotiated on a lump-sum basis and comprises predominantly earlier projects now at advanced stages.
“We believe margin downside risks are manageable as accelerated progress in DC projects may yield cost savings and variation-of-price mechanisms due to remote factors may allow for price adjustments, with the view that MNC clients are generally open to negotiations.
“We expect first-half of FY26 margins to remain elevated, supported by several projects nearing book closure, with upside from margin recalibration as prudent provision buffers are typically maintained ahead of project handover,” it added.
On SunCon’s highway projects in India, management has been exploring the monetisation of RM400mil in receivables that come under a hybrid annuity model.
“If successful and assuming proceeds are earmarked for distribution, this could provide upside to our FY26 dividend forecast of 31 sen (based on a 100% payout).
“In a full distribution scenario, we estimate a potential special dividend of 30 sen, implying an overall yield of 9% at the current share price,” it said.
