Share
- "Even so, given its strong brand equity and parentage, we think SunCon will be able to recover from this event without impacting its new order wins materially over the longer term."
KUALA LUMPUR (July 22): Sunway Construction Group Bhd's (KL:SUNCON) tendering activities — particularly in the RM14 billion data centre segment — may face near-term disruption following an anti-graft investigation into an employee's dealings with subcontractors, though the company itself is not under scrutiny, said analysts.
While SunCon maintains this is an isolated incident with no senior management involvement, reputational risks could temporarily advantage rivals like Gamuda Bhd (KL:GAMUDA) and IJM Corp Bhd (KL:IJM), according to CGS International.
"This may impact some of SunCon’s ongoing tenders, especially in the data centre space, of which we understand there are seven to eight totalling RM14 billion.
"Even so, given its strong brand equity and parentage, we think SunCon will be able to recover from this event without impacting its new order wins materially over the longer term," said the research house in a note on Tuesday.
CGS International noted that SunCon’s year-to-date (YTD) FY2025 wins amount to RM3.5 billion and its order book stood at RM7.9 billion as at June, with data centres making up 49%.
"We believe its current new order win target for FY2025F of RM4.5 billion-RM6 billion is intact but may not surprise on the upside to justify a meaningful rerating," it added.
Meanwhile, Phillip Capital said group’s tender success rate in securing new tenders, particularly data centre, may be indirectly affected as foreign multinational corporation clients increasingly prioritise environmental, social and governance, and compliance standards.
"The group is eyeing four to five data centre projects, which account for 90% of the group’s RM15 billion tender book. With the group’s YTD new wins totalling RM3.5 billion, the group remains on track to meet its internal target of RM4.5 billion-RM6 billion and our replenishment assumption of RM5 billion even with just one data centre project win (circa RM1 billion) in 2H2025," said the research house.
Phillip Capital upgraded its rating to "hold" from "sell" with an unchanged target price of RM5.35. After the recent 8% drop in share price following the news, it believes the current valuation is reasonable, given the company’s strong earnings growth outlook of 75% year-on-year.
CGS retained its "hold" call and RM5.50 target price, citing unattractive valuation (22 times FY2026F price-earnings vs the sector's 14 times) and potential near-term share price pressure from the ongoing Malaysian Anti-Corruption Commission investigation.
"In our view, investors were ascribing a premium for its ROE (return on equity)-enhancing data centre exposure. However, unless it manages to win more data centre jobs, we do not see any meaningful earnings growth beyond FY2025," said CGS International.
The research house has cautiously cut its earnings per share estimates for FY2025 to FY2027, reflecting lower expected new project wins and the extra shares issued under the employee share scheme.
At 4.45pm on Tuesday, SunCon shares stood at RM5.34, down 15 sen, giving a market capitalisation of RM7.08 billion.
(Read also: Sunway Construction says an employee under investigation by anti-graft agency)
Does Malaysia have what it takes to become a Blue Zone, marked by health and longevity? Download a copy of EdgeProp’s Blueprint for Wellness to check out townships that are paving the path towards that.
