Analysts warn of contract risks for Sunway Construction amid MACC Probe
This development may raise concerns over SunCon's job prospects, pending greater clarity on the outcome of the investigation, CIMB Securities noted.
In the first quarter of 2025 (1Q25), SunCon's construction pre-tax profit dipped 2 per cent quarter-on-quarter to RM115 million, accounting for 38 per cent of Sunway Group's overall earnings. CIMB values the segment at RM3.6 billion (or RM0.55 per share), equivalent to 9 per cent of its sum-of-the-parts (SOTP) valuation. Notably, foreign shareholding in SunCon rose significantly, from 7.2 per cent in April to 13 per cent by June 2025.
SunCon clarified that the MACC probe is an isolated case and unrelated to the group's contract procurement processes. The company is cooperating fully with authorities and has engaged legal counsel to assess its next course of action.
On a more upbeat note, Sunway's property development arm continues to deliver, particularly in Singapore. Jointly developed with long-time partner Hoi Hup Realty, Otto Place is located in the eco-centric, car-lite Tengah Plantation District. During its July 19, 2025 launch, 351 out of 600 units were sold – achieving a 59 per cent take-up rate. Units were priced at an indicative S$1,700 psf under the Normal Payment Scheme, while 72 per cent of buyers opted for the Deferred Payment Scheme with a 3 per cent pricing premium.
The car-lite development offers 872–1,195 sq ft units with three- to four-bedroom layouts, eight landscaped zones, and sports facilities. Larger units were especially popular, with over 70 per cent sold at launch – mostly to HDB upgraders.
Building on this momentum, Sunway also secured a 3.9-acre parcel at Chuan Grove through a JV with Sing Holdings Residential (35:65 share). The land, acquired for S$704 million (RM2.3 billion) or S$4,131 per sq ft, is slated for private condominium development. While the gross development value is yet to be finalised, CIMB expects these ventures to support Sunway's property earnings, which contribute around 20 per cent to FY25 profit.
CIMB maintains a "Hold" call on Sunway, with a SOTP-based target price of RM4.90.
Meanwhile, RHB Research is also monitoring the MACC investigation but has not revised its earnings forecasts for SunCon. However, it has downgraded the group's ESG score slightly – from 3.3 to 3.1 – after revising its governance (G) component downward.
"We flag risks in terms of securing jobs moving forward," RHB Research said in a note.
SunCon will likely enhance its internal governance policies moving forward, RHB said, adjusting its target price to RM6.55 (from RM6.80) to reflect a 2 per cent ESG premium based on the new rating. The valuation is based on fiscal year 2026 (FY26) earnings per share and an unchanged per earnings ratio (P/E) target of 23.5x.
Currently, SunCon shares are trading at a forward P/E of 20x for FY26 – a level RHB sees as offering further upside, especially if the company secures upcoming data centre contracts. During the 2017 construction upcycle, when data centres were not a key driver, SunCon traded in a lower P/E range of 15–17x.
A potential rerating catalyst, RHB added, would be SunCon winning packages under the Penang Light Rail Transit (LRT) project. The group's last major infrastructure contract was awarded in March 2023 for the Rapid Transit System Link (Package 1B and Package 5).
Still, a key downside risk remains: lower-than-expected job wins, it said.
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