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SunCon banks on other divisions to boost sales
There is no looking back for Sunway Construction Group Bhd (SunCon), which continued to climb from its 52-week low of RM1.93 last December. The counter has since moved upwards to touch a high of RM5.18 in July.
Year-to-date, it has been impressive in terms of share price movement. It saw a 131.7% surge YTD to close at RM4.61. The gain would have been more phenomenal if compared to the time when SunCon touched its year-low.
Analysts are projecting a stronger showing from SunCon in 4Q2024, driven by significant job progress, especially data centre (DC)-led projects. SunCon’s 3QFY2024 results were in line with expectations and envisaged a stronger 4Q, backed by greater progress in its DC jobs. The anticipated improvement is linked to the advancement of the first package for the RM1.7 billion JHB1X0 data centre project in Johor.
However, SunCon’s 9MFY2024 results came in below expectations, with core profit accounting for just 55% of its FY2024 forecast. This was largely due to the higher proportion of low-margin in-house projects during 3QFY2024, which led to a lower-than-expected profit margin of 4.0%. In the immediate term, SunCon is expected to register lower earnings in FY2024 but 53% growth in FY2025.
Growth will be mainly supported by stronger revenue recognition from a mix of DC projects, which make up about half of its outstanding order book. In addition, the development of the Johor-Singapore Special Economic Zone through Sunway City Iskandar Puteri, will add to the long-term potential for SunCon.
Meanwhile, its parent company Sunway’s planned hospital expansions in Penang, Kelantan and Iskandar Puteri, as well as a future education campus in Ipoh, will provide SunCon continued growth.
Whatever weakness seen currently will not likely to continue as the company is expected to be a key beneficiary of the better prospects of the construction sector.
Major infrastructure projects such as the RM10 billion Bayan Lepas LRT, the Pan Borneo Sarawak & Sabah Highway and several flood mitigation initiatives expected to drive growth.
Year-to-date, it has been impressive in terms of share price movement. It saw a 131.7% surge YTD to close at RM4.61. The gain would have been more phenomenal if compared to the time when SunCon touched its year-low.
Analysts are projecting a stronger showing from SunCon in 4Q2024, driven by significant job progress, especially data centre (DC)-led projects. SunCon’s 3QFY2024 results were in line with expectations and envisaged a stronger 4Q, backed by greater progress in its DC jobs. The anticipated improvement is linked to the advancement of the first package for the RM1.7 billion JHB1X0 data centre project in Johor.
However, SunCon’s 9MFY2024 results came in below expectations, with core profit accounting for just 55% of its FY2024 forecast. This was largely due to the higher proportion of low-margin in-house projects during 3QFY2024, which led to a lower-than-expected profit margin of 4.0%. In the immediate term, SunCon is expected to register lower earnings in FY2024 but 53% growth in FY2025.
Growth will be mainly supported by stronger revenue recognition from a mix of DC projects, which make up about half of its outstanding order book. In addition, the development of the Johor-Singapore Special Economic Zone through Sunway City Iskandar Puteri, will add to the long-term potential for SunCon.
Meanwhile, its parent company Sunway’s planned hospital expansions in Penang, Kelantan and Iskandar Puteri, as well as a future education campus in Ipoh, will provide SunCon continued growth.
Whatever weakness seen currently will not likely to continue as the company is expected to be a key beneficiary of the better prospects of the construction sector.
Major infrastructure projects such as the RM10 billion Bayan Lepas LRT, the Pan Borneo Sarawak & Sabah Highway and several flood mitigation initiatives expected to drive growth.
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