PETALING JAYA: Sunway Construction Group Bhd
(SunCon) is expected to sustain its strong earnings momentum as robust demand for data centre construction continues to replenish its order book, with analysts seeing further contract wins in the second half of the year (2H26) from both existing hyperscale clients and new customers.
Research houses said the contractor remains well placed to benefit from Malaysia’s expanding data centre ecosystem while also being in contention for major infrastructure jobs, providing visibility for earnings over the next few years.
The generally optimistic outlook followed SunCon’s announcement that it had secured a RM1.02bil contract from a US-based multinational technology company to undertake mechanical, electrical and plumbing (MEP) works for a data centre in Johor.
The project is expected to be completed by the fourth quarter of calendar year 2027.
Kenanga Research said the group’s prospects remain underpinned by an active pipeline of projects.
“Following this win, SunCon maintains a robust contract pipeline, actively participating in data centre tenders for five other clients (comprising three existing and two new clients),” the research house said.
It added that the company’s active tender book remained elevated at about RM14.3bil across both data centre and non-data centre projects, alongside recurring in-house jobs from the Sunway Group itself.
TA Research said the latest award was linked to an existing data centre project where SunCon had previously won the core-and-shell construction package.
The research house noted that the contract lifted the group’s year-to-date job wins to RM5.8bil and expanded its outstanding order book to RM10.4bil, equivalent to about 1.9 times its revenue for the fiscal year ended December 2025 (FY25), providing healthy earnings visibility.
It also raised its FY26 job replenishment assumption for SunCon to RM7bil from RM6.5bil after factoring in the favourable outlook for Malaysia’s data centre industry and the company’s sizeable tender pipeline.
“We remain constructive on SunCon’s near-term data centre order book replenishment prospects, with further contract opportunities expected in 2H26, including the Shell 2 M&E (mechanical and electrical) package and the remaining phases of the JHB1X0 data centre campus in Sedenak,” TA Research said.
The research house also observed that the contract value exceeded its earlier estimate of around RM900mil.
“We believe the increase reflects higher construction costs amid recent rising building material and M&E equipment prices, coupled with the increasing complexity of hyperscale data centres, which require more advanced electrical, cooling and backup power systems,” it said.
Kenanga Research said the latest contract further reinforced SunCon’s competitive standing in securing sophisticated projects from global technology companies.
The research house believes the latest data centre award is keeping SunCon on track to achieve the brokerage’s FY26 replenishment assumption of RM7bil, while management is expected to unveil a revised internal target when it announces its second-quarter results later this month.
Meanwhile, MBSB Research described the latest project win as SunCon’s largest standalone MEP contract to date, noting that it came in well above its earlier expectations.
“The contract value came in meaningfully above our earlier estimate of RM600mil to RM700mil, following the client’s decision to fit out the building’s full MW capacity, compared to the partial fit-out initially envisaged,” the research house said.
It expects the latest award to pave the way for more follow-on jobs as SunCon continues executing its strategy of securing MEP packages after completing core-and-shell works for existing hyperscale customers.
The researc house noted that around 90% of the group’s RM13.5bil tender book as at July comprised data centre projects, split roughly equally between Johor and the Klang Valley, while potential wins in 2H26 could include approximately RM1bil worth of internal hospital and transit-orientated development projects.
On valuations, the research houses largely maintained their positive stance on the stock. TA Research maintained its “hold” recommendation but raised its target price to RM8.26 from RM7.99 after increasing earnings forecasts.
Kenanga Research reiterated its “outperform” call with an unchanged target price of RM8.40, citing the group’s RM10.4bil outstanding order book, recurring jobs from related companies and strong execution capabilities across building, infrastructure and MEP works.
MBSB Research was the most bullish among the three, maintaining its “buy” recommendation while lifting its target price to RM8.81 after raising earnings estimates.
“SunCon is supported by strong fundamentals, a resilient balance sheet, and promising growth prospects in the construction sector,” the research house said.
At the same time, an analyst with a foreign brokerage holds a similarly constructive opinion on SunCon, albeit a slightly more measured one.
“Beyond data centres, there are additional upside catalysts from major infrastructure projects such as Johor’s Elevated Autonomous Rapid Transit and the Penang Light Rail Transit, while recurring in-house jobs from the Sunway Group provide a steady base of work.
“That said, much of the market’s enthusiasm is already reflected in the share price after its strong run, leaving less room for valuation expansion,” she told StarBiz.
