KUALA LUMPUR: RHB investment Bank Research expects Sunway Construction Group Bhd (SCGB)'s second quarter 2023 (2Q23) core earnings to grow quarter-over-quarter to RM30-40 million, from RM26 million in 1Q23.
The growth will be driven by the ramp-up in progress of projects that were in their early stages during 1Q23, it said. "SCGB's potential involvement in the Song Hau 2 power plant in Vietnam plus strong data centre demand in Malaysia may mitigate any downside risks from the local construction sector," said the research house in a note today.
The Song Hau 2 power plant project in Vietnam worth RM6 billion is awaiting financial close – likely by September or October, which could boost its FY24-25F earnings by 30-35 per cent.
Prime Minister Datuk Seri Anwar Ibrahim's visit to Vietnam in late July may also bring about further bilateral cooperation between both countries – possibly translating to other energy-related infrastructure opportunities for SCGB in light of Vietnam's Power Development Master Plan VIII SCGB's 1Q23 core profit fell by 44 per cent QoQ as the RM1.7 billion data centre job in Johor (c.30 per cent of outstanding orderbook) just commenced works following the contract award in late Dec 2022.
"Despite some delays in the issuance of second and third notices to proceed by the client, this job is still well on track to be completed by end-2024, as project works ramped up over 2Q23," said RHB. The National Energy Transition Roadmap (NETR) may bring further opportunities in the form of EPCC jobs for solar power plants, as a renewable energy zone has been earmarked as one of ten flagship catalyst projects.
NETR's ten flagship catalyst projects should generate a projected total investment of RM25 billion.
SCGB's jobs related to the sustainable energy segment make up 7 per cent (RM420 million) of its total orderbook (via five contracts).
The job to construct a 50MW solar power plant in Perak for Gopeng Bhd (GOP MK, NR) has the largest outstanding orderbook of RM166 million as at end-1Q23.
RHB investment Bank research maintained a buy call with a new target price of RM2.08 from RM 2.05.