Sunway Construction Group Bhd (SUNCON) experienced a potent combination of earnings upgrades and P/E re-ratings, as cited by CGS International Stock Broking House, in their report today (July 11, Thursday). CGS expects SUNCON to achieve its Fiscal Year 2024 Forecast (FY24F) new order wins of RM5.2 billion, particularly benefiting from upsizing existing data centre projects.
This prompted the broking house to reiterate an ADD rating while raising the target price to RM5.46.

CGS highlighted SUNCON's strategic shift towards data centre projects and potential government infrastructure revivals following the setback of the Song Hau 2 thermal plant project cancellation. With data centres contributing significantly to its orderbook, SUNCON is poised for projects like the expanded Sedenak data centre contract, now valued at RM3.2 billion, and additional bids in Johor.

The broking house raised its earnings forecasts for FY24F–FY26F by 6%, 23%, and 8%, respectively, adjusting revenue recognition for key projects like Sedenak. With an upgraded target price derived from its SOP model to RM5.46, CGS justified a higher target P/E of 22x for SUNCON, reflecting superior ROEs and a leading market position in data centres. The recent re-rating driven by EPS upgrades supports CGS's positive outlook, emphasizing SUNCON's execution track record and early mover advantage in data centres.

CGS maintained its ADD rating on SUNCON, citing a promising 3-year EPS CAGR of 23% and robust ROEs of 23–30% for FY24–FY26F. It identified government infrastructure awards and expanded data centre projects as catalysts for further re-rating.