SunCon order book replenishment on track

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AmInvestment Bank in a report said it was maintaining its order book replenishment forecast of RM1.7bil annually for SunCon from 2022 to 2024, on expectations of job flows recovering in the second half of the year.

PETALING JAYA: Sunway Construction Group Bhd (SunCon) is set to see a replenishment in its order book over the next two years, as construction jobs start to gain traction.

AmInvestment Bank in a report said it was maintaining its order book replenishment forecast of RM1.7bil annually for SunCon from 2022 to 2024, on expectations of job flows recovering in the second half of the year.

“Potential replenishment could come from internal building jobs from its parent and sister companies under the Sunway Group, which is targeting new launches of RM2.3bil in 2022.”

The research house added that elevated portions of the Mass Rapid Transit 3 project are also set to boost SunCon. “We believe SunCon is a strong contender due to its solid balance sheet and proven track record.

“During our recent engagement with the company, SunCon reiterated that most of its ongoing construction projects are at the post-structural intensive stage, hence the impact from elevated building material costs is manageable.”

For newer tenders, AmInvestment Bank said the higher costs are being priced in through increased contract value. “SunCon also expects labour shortages to ease in the coming months,” it said.

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The research house added that potential challenges that the company could face include rising building material costs and delays or shelving of mega-projects.

Separately, in a report on parent company Sunway Bhd, RHB Investment Bank said the firm’s solid fundamentals and diversified business model should help it to ride through this challenging period.

“Better earnings recovery in its three core divisions this year is likely to offset the weakness in smaller business divisions. The progressive opening of new investment properties will likely boost the performance of the property investment and healthcare divisions.”

All of the group’s divisions, with the exception of the smaller ones, should perform better, said RHB.

“We recently hosted a virtual meeting with Sunway’s chief financial officer Chong Chang Choong and the investor relations team. Management guided that the key divisions, namely, the property development, property investment and construction should see better earnings this year.

“But trading and manufacturing, quarry and building materials may remain weak due to slower demand recovery, cost pressure, as well as disruption in supply due to the lockdown in China,” it said.

RHB noted that profit contribution from these three divisions has been small, accounting for only 10% to 12% of pre-tax profit, during the pre-pandemic years.