PETALING JAYA: RHB Research suggests that Sunway Construction Bhd’s foray into industrial projects, particularly data centers, can help offset potential risks stemming from public infrastructure ventures. Currently, the South Quay Square (SQS) project in Bandar Sunway serves as the primary revenue generator for Sunway Construction’s internal jobs segment.
The SQS project consists of two office towers, a retail area, and a university. RHB Research predicts that it will contribute approximately 16%, 16%, and 7% to the company’s pre-tax profit for the financial years 2023 (FY23), FY24, and FY25, respectively.
According to RHB Research, Sunway Construction initially secured a RM119 million contract for piling works in June 2019, followed by a RM284 million contract for the main construction of the project in August 2020. In December 2021, the overall contract value was revised to RM756 million. In April, the company further obtained contracts worth RM607 million, bringing the total value to RM1.3 billion from the initial RM756 million.
“As of the first quarter of 2023, the project’s unbilled portion amounts to RM1.1 billion, accounting for 48% of the company’s internal order book. This represents a completion rate of 15% to 16%,” revealed RHB Research.
Based on RHB Research’s estimates, around 39% of Sunway Construction’s overall order book of RM6.1 billion comes from internal jobs awarded by its parent company, Sunway.
RHB Research has given the stock a “buy” rating, with a target price of RM2.05 per share. The research firm justifies its valuation target of 15.5 times based on Sunway Construction’s order book/revenue cover of approximately 3.1 times and the steady flow of projects from its parent company.
Credit: The Star : Business Feed
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