PETALING JAYA: Sunway Construction Group Bhd
(SunCon) is likely the strongest proxy for the data centre (DC) theme in Malaysia, as it has established strong stickiness with its broader DC clientele.
The integrated construction company’s recent announcement that it secured additional work for two DC-related substation projects in Johor has further boosted the group’s prospects.
The aggregate contract value of the works has increased to RM865.6mil, following the acceptance of change orders amounting to RM664.4mil.
With this win, its year-to-date June 2026 contract wins now amount to RM4.2bil, bringing its order book to RM8.8bil.
CGS International (CGSI) Research said SunCon’s RM6bil new order win target for financial year 2026 (FY26) is too conservative, as there is a high probability it can convert most of its RM15bil tender book, which consists of its existing six DC clients and one new client.
“In our view, the project with the most significant upsize potential is JHB1XO Building 2.
“We also think SunCon should be the front-runner for two remaining packages at Bandar Serendah, Selangor, as it clinched the first phase worth RM1.75bil in April 2026,” it said.
CGSI Research maintained its “add” on the stock with a target price of RM9.
Kenanga Investment Bank Bhd said that given the strong DC pipeline, it is raising its FY27 earnings forecasts by 8%, as it increases its job win assumption by RM1bil to RM6bil.
“We like SunCon for its strong job prospects, strong earnings visibility underpinned by RM8.8b outstanding order book and recurring jobs from parent and sister companies, and its extensive capabilities and track record,” it noted.
The research house reaffirmed its “outperform” call on the stock with a higher target price of RM8.40, up from RM7.76, based on an unchanged price-to-earnings ratio of 22 times.
However, the brokerage said risks to its recommendation included weak flows of construction jobs from both the public and private sectors, project cost overrun and liabilities arising from liquidated ascertained damages, and rising costs of building materials.
Meanwhile, RHB Investment Bank Bhd said following SunCon’s recent contract win, it reckons the possibility of the group tendering for the core and shell plus other mechanical and electrical -related works for the said DC in Johor is strong.
“Profitability-wise, we expect the profit before tax margin for the substation works to be 8% to 10%,” it said.
It also noted that out of the total wins this year, 43% came from new clients as estimated.
The research house made no changes to its estimates as the latest win is within its job replenishment target of RM6bil.
“However, we flag upside risks to our projections should SunCon’s FY26 forecast new wins exceed RM6bil. Therefore, our target price of RM8.33 is unchanged.”
The brokerage said a key catalyst would be SunCon securing new DC jobs beyond its current areas of involvement.
