KUALA LUMPUR: Affin Hwang Capital expects a stronger second half (2H) in 2019 for Sunway Construction Group Bhd (SunCon) on RM781m TNB job and RM7.4b worth of tenders submitted
despite weaker results it registered in the first quarter (Q1).
The research house said while SunCon’s net profit fell 13 per cent year-on-year to RM31 million in Q1, the group saw good order book replenishment with RM1 billion new contracts clinched in Q1 and is on track to meet its RM1.5 billion target in 2019.
“We maintain our EPS (earnings per share) forecasts on expectations of an acceleration in progress billings in 2H 2019,” it said in a note.
It said SunCon clinched RM1 billion worth of new contracts, including the RM781 million Tenaga Nasional Bhd headquarters campus development.
Besides that, SunCon has submitted tenders worth RM7.4 billion including road and railway projects in India, piling projects in Singapore and hospitals for Sunway.
AffinHwang said SunCon’s Q1 net profit of RM31 million made up only 20 per cent to 21 per cent of market consensus and the research house’s financial year 2019 forecasts of RM145 million to RM153 million.
It said slow progress billings and completion of several projects in the previous year led to revenue declining 17 per cent year-on-year and 30 per cent quarter-on-quarter to RM440 million in Q1.
“There were slower progress billings for the Klang Valley MRT Line 2 (MRT2) and Light Rail Transit 3 (LRT),” it said.
Core net profit fell 17 per cent year-on-year and 45 per cent quarter-on-quarter to RM28 million in Q1 on the back of lower revenue while Q4 2018 earnings were boosted by profits from the finalisation of accounts for three completed projects, which did not recur.
AffinHwang said SunCon remains its top mid-cap construction “buy” with a new target price of RM2.24 from RM2.00.
“SunCon is a potential beneficiary of projects to be revived such as the MRT3, Penang LRT and East Coast Rail Link,” it said.