KUALA LUMPUR: Hong Leong Investment Bank (HLIB Research) raised its financial year 2024 (FY24) and FY25 earnings forecasts for Sunway Construction Group Bhd (SunCon) by 2.9 per cent following the company's double contract wins that carried an effective value of RM488 million.
On Thursday, SunCon announced that it had accepted a letter of intent worth RM190 million for the proposed development of a data centre located in Johor from K2 Strategic Infrastructure Malaysia Sdn Bhd (subsidiary of Kuok Group).
The construction period is expected to take 14 months, to be completed by the fourth quarter of 2024 (Q4 2024) and is to begin imminently.
"We do not expect delays in commencement as seen in its maiden data centre contract (Sedenak, Johor)," HLIB.
SunCon also signed a letter of acceptance with Daiso malaysia Group Sdn Bhd, through its 50:50 joint venture with Kajima (Malaysia) Sdn Bhd in respect of the proposed design and construction of Daiso global distribution centre warehouse located at Pulau Indah, Port Klang. Besides the contract wins, SunCon announced that its consortium with Power Engineering Consulting Joint Stock Company 2 (PECC2) have entered into an addendum to agreement with Song Hau 2 to amend certain terms of the contract which include extending the proposed date for issuance of the notice to proceed to a date on or before June 30, 2024 and (ii) amendments to the definition and provisions relating to the limited notice to proceed whereby Toyo shall provide the consortium with limited access to the site to carry out phase 1 and 2 of limited works not exceeding US$9.5 million.
"Both the data centre and warehouse contract wins lift SunCon's unbilled order book by RM487.7 million to RM6.26 billion. "Including its Corporate Green Power Programme (CGPP) contract would lift this further to RM6.4 billion (3.0x cover). Nevertheless, the CGPP contract will not generate earnings impact until the asset is commissioned in 2025," it said.
HLIB added the company has tallied RM2.2 billion of contract wins year-to-date surpassing its base case guidance while still having several tenders pending award decision by year end.
"We see upside risks to our FY23 replenishment assumption of RM2.5 billion," said HLIB.
HLIB maintained its "Buy" call on the stock with a target price of RM2.16.