Latest news with #SunCon
BusinessToday
3 days ago
- Business
- BusinessToday
HLIB Picks Gamuda, IJM As Benefactors From A Sector Robust In 2H
Hong Leong Investment Bank Bhd (HLIB) is maintaining its OVERWEIGHT call on the construction sector, citing a promising second half anchored by data centres (DCs), infrastructure rollouts and continued private sector demand. Gamuda and IJM remain the research house's top picks with BUY ratings and target prices of RM5.50 and RM2.96, respectively, supported by robust balance sheets and strong orderbook prospects. The KLCON Index managed to outperform the broader FBM KLCI by 3.6% in a volatile first half, despite multiple negative events. The sector saw a sharp recovery of 29% from April lows, attributed to rescinded GPU restrictions, reaffirmed capex from Big Tech, healthy contract flows and solid 1Q earnings. Gamuda and Sunway Construction delivered 1H gains of 1.1% and 29.6% respectively, outperforming the broader sector. Year-to-date (YTD), total contract awards reached RM28.9 billion, representing a 39.5% year-on-year growth. Notable contracts include the RM8.3 billion Penang LRT Segment 1 to the SRS Consortium (60% Gamuda), RM2.94 billion KSSC redevelopment to MRCB and the RM2.47 billion variation order for LRT3, also to MRCB. However, DC-related contracts in 1H fell 31% year-on-year to RM3.3 billion, which HLIB attributes to timing factors as several large-scale hyperscale tenders were only recently called. Looking into 2H25, HLIB expects a surge in DC awards, including five multibillion-ringgit tenders from a US-based hyperscaler. Larger contractors such as Gamuda, IJM and SunCon are anticipated to benefit most, leveraging their financial strength, execution track records and integrated value chain offerings. The firm remains cautious on potential AI chip export restrictions affecting Malaysia but believes such risks are partially mitigated by the sector's dependency on Western hyperscalers, with exemptions likely to be granted. On the impact of the reimposed 6% SST on construction, HLIB notes that most non-residential projects are protected by contract clauses that allow for cost pass-throughs. Government and residential projects remain exempt, narrowing the range of exposure. For DC projects specifically, the firm believes the impact will be muted due to contract structures like FIDIC and sustained demand despite cost pressures. SunCon's target price has been revised upward to RM6.70 (from RM5.93), following higher replenishment assumptions in FY25–27. HLIB now expects FY25 contract wins to hit RM7.3 billion, factoring in SunCon's growing edge in hyperscale DC execution, including ahead-of-schedule completions for projects like K2 and Yellowwood. Despite possible sector headwinds from the AI chip issue, slower property markets and subsidy rationalisation, HLIB sees room for further rerating, with forward valuations still attractive at 19.1x P/E and 1.3x P/B. Related
The Star
08-07-2025
- Business
- The Star
Possible restriction on chips looms over SunCon
PETALING JAYA: While a knee-jerk reaction is expected for Sunway Construction Group Bhd (SunCon) following news last week of a possible US plan to restrict shipments of artificial intelligence (AI) chips to Malaysia, estimates for the group have been left unchanged, analysts say. Maybank Investment Bank Research (Maybank IB) believes it is still too premature at this point to pass judgement. 'However, we highlight two possible scenarios – worst case fair value of RM2.16 if annual job wins fall to RM1.6bil, and share price falling to as low as RM3.36 on a price-to-earnings multiple derating to trough levels.' Maybank IB said its current target price of RM6.72 and its 'buy' rating were premised on annual job wins of RM7bil. SunCon shares were at RM5.87, down 12 sen or 2%, yesterday afternoon. It ended the day at RM5.88. Last Saturday, it was reported that the United States was planning to restrict shipments of AI chips that power data centres to Malaysia and Thailand, which suggests that the construction of data centres may decelerate and affect contractors such as SunCon. 'Of all the contractors under our coverage, it is the most exposed to data centres,' the research house said. As of May 31, data centres accounted for 51% of SunCon's RM7.9bil order book and 54% of its RM3.5bil year-to-date (YTD) job wins. From 2020 to last year, SunCon won an average of RM1.6bil of non-data centre jobs a year, it added. The builder's YTD job wins of RM3.5bil comprised data centres at 54% and 46% other jobs. 'Assuming SunCon does not win any more data centre jobs from the second half of this year (2H25) but only wins RM1.6bil of non-data centre jobs a year (half-year impact in 2H25), our FY25 to FY27 earnings per share (EPS) could drop by 5%, 43% and 67% respectively. 'Ascribing a 19 times price-to-earnings multiple to FY27 EPS, when the lower job wins would have largely played out, a situational 'worst case' fair value works out to be RM2.16,' the research house said. Downside risks for SunCon include slower-than-expected progress at existing projects which will affect the timing of earnings recognition, the research house said. Maybank IB also said the timing of the rollouts for large infrastructure projects by the government could affect order book replenishment. 'In the precast-concrete segment, significant increase in steel prices and stiffer competition could also affect margins,' the research house said.
New Straits Times
23-06-2025
- Business
- New Straits Times
Positive Q2 earnings seen for listed construction companies
KUALA LUMPUR: Listed construction companies may see earnings rising in the second quarter (Q2) of 2025, after posting steady growths in Q1, industry observers said. They, however, said while job fows may steadilly pick up, margins will remain under pressure in some cases. Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng said most companies delivered Q1 earnings that reflected stable progress on ongoing projects and effective cost management, despite a still-cautious operating environment. One of the key outperformers during the quarter was Sunway Construction Group Bhd (SunCon). The company stood out for its steady order book execution, strong project pipeline, and operational efficiency, Thong said. Looking ahead, he expects job flows to gradually pick up, supported by the rollout of major infrastructure projects such as the estimated RM17 billion Penang Light Rail Transit (LRT). However, he said the tangible impact on company earnings may only be seen further down the line. "We could see progress recognition begin in late 2025 or early 2026. Earnings from these projects will likely come through in early 2026," he told Business Times. Another industry analyst concurred that overall, most listed construction firms had met or slightly exceeded market expectations in Q1. However, he noted that margins remained under pressure in some cases due to elevated material and labour costs. "We saw that SunCon did well with solid execution and steady wins that kept them ahead. Gamuda Bhd also stood out, thanks to their overseas projects in Australia and Taiwan. "The group's geographically diversified operations are paying off, providing a buffer against the slower pace of local job flows," he noted. The analyst said the Penang LRT project provides clear visibility for the sector's medium-term pipeline, although actual disbursement and contract awards may only materialise meaningfully from late 2025. CIMB Securities Sdn Bhd said the construction sector reported another steady set of results during the recently concluded Q1 reporting season. "Among the construction stocks within our coverage, four reported results that met expectations, while IJM Corp Bhd outperformed." The firm highlighted that none of the construction companies incurred any major provisions or impairments for their projects. Overall, CIMB Securities maintained an "Overweight" call on the construction sector, and project calendar year 2025 earnings growth of 10 per cent year-on-year. On a quarter-on-quarter basis, the firm expect sector earnings growth to remain on an upward trajectory in Q2, underpinned by higher construction site activities post the festive breaks in Q1.. Likewise, it said order book visibility is improving alongside the gradual rollout of big-ticket public projects and the potential award of up to six large-scale data centre facilities worth about RM2 billion each over the next two to three quarters. The firm expects the pace of job awards in the construction industry to gather momentum ahead of the 13th Malaysia Plan, which is set to be tabled in July. Nevertheless, it said the expanded Sales and Service Tax scope could re-ignite near-term uncertainties concerning the margins of ongoing non-residential construction jobs of lower value. "We reinstate IJM Corp as one of our top large-cap construction picks alongside Gamuda. "IJM Corp is in the final stages of converting RM6 billion-RM8 billion worth of ongoing bids, and recently received the green light to proceed with the RM1.4 billion New Pantai Expressway extension," it noted. Meanwhile, CIMB Securities said Gamuda remains on track to meet its end-2025 order book target of RM40 billion-RM45 billion, supported by around RM24 billion in high-conviction tenders. These include up to six data centre-related bids, each valued at about RM2 billion. For alpha plays, the firm highlighted Malaysian Resources Corporation Bhd (MRCB), which had secured RM5.6 billion worth of new jobs year to date. It added that there is upside risk to MRCB's FY25 new order book target of RM6 billion, citing potential wins from the RM1 billion KL Sentral redevelopment and an active tender book of RM1.7 billion. As for small-cap exposure, the firm pointed to Econpile Holdings Bhd, citing its potential to benefit from a reacceleration in larger-scale piling works.
The Star
12-06-2025
- Business
- The Star
Bursa Malaysia inches up as caution reins in bulls
KUALA LUMPUR: Bursa Malaysia ended the morning session slightly higher, lifted by gains in oil and gas stocks, although overall market sentiment remained cautious amid external uncertainties. At the lunch break, the FBM KLCI rose 2.62 points or 0.17% to 1,526.46, rebounding from an intra-morning low of 1,523.22. Losers outpaced gainers 446 to 278, while 477 counters were unchanged. Turnover stood at 1.6 billion shares worth RM883.6 million. Oil and gas and related stocks were among the top gainers on Bursa Malaysia, buoyed by stronger oil prices amid escalating US-Iran tensions. Hengyuan Refining Co added 11 sen to RM1.71 while Petron Malaysia Refining & Marketing gained 10 sen to RM3.68. Dayang climbed five sen to RM1.90, Hibiscus rose five sen to RM1.55, Dialog added three sen to RM1.53 and Bumi Armada gained 0.5 sen to 48 sen. Other gainers on Bursa Malaysia included PETRONAS Gas, up 16 sen to RM17.86, Chin Tek, up 13 sen to RM8.85, Hong Leong Financial Group, up 12 sen to RM16.70, and Maybank, up nine sen to RM9.79. Among the losers, Hong Leong Industries slid 34 sen to RM13.28, F&N fell 22 sen to RM28.22, Heineken lost 14 sen to RM27.18, and Malaysian Pacific Industries declined 12 sen to RM21.20. Malacca Securities expects the FBM KLCI to trade on a softer tone, mirroring the negative performance on Wall Street. However, the research house remains positive on the construction sector, particularly on SunCon, following its recent RM1.16bil project win, which has boosted its outstanding order book to approximately RM7.9bil — representing a cover ratio of over two times its forecasted FY24 revenue. 'Traders may also focus on the O&G sector amid rising crude oil prices due to escalating geopolitical tension between US-Iran. 'Aside from healthy dividend payouts, we favour Sunway REIT for its active asset acquisition activities and defensive characteristics in weathering economic uncertainties,' Malacca Securities said. Meanwhile, TA Securities expects blue-chip stocks to extend their gains, supported by optimism over easing US-China trade tensions. However, it noted that further upside may be limited by lingering concerns over President Trump's unpredictable trade policies and the absence of clear progress on a US-Malaysia trade agreement. 'Immediate index support stays at 1,490, while stronger supports can be found at 1,465 and 1,444.
The Star
29-05-2025
- Business
- The Star
SunCon wins RM1.2bil deal
SunCon said the works are expected to contribute positively to the earnings of the group for the financial year ending Dec 31, 2025 onwards. PETALING JAYA: Sunway Construction Group Bhd (SunCon) has accepted work orders from a multinational technology company headquartered in the United States in respect of the provision of general contractor works for two data centre projects, worth RM1.16bil. In a filing with Bursa Malaysia, the company said the works are scheduled to commence immediately, with final completion expected by February 2027. 'The works will not have any effect on the share capital and substantial shareholders' shareholding of SunCon as it does not involve any allotment or issuance of new shares by SunCon. 'The works are not expected to have any immediate material effect on the earnings per share, net assets per share and gearing of SunCon for the financial year ending Dec 31, 2025.' However, barring any unforeseen circumstances, SunCon said the works are expected to contribute positively to the earnings of the group for the financial year ending Dec 31, 2025 onwards. 'As of today, SunCon group's total outstanding order book stands at RM7.9bil. This includes new projects secured to date this year, totaling RM3.5bil, which encompasses the above mentioned works.'
