ดว
AmInvestment Bank
SUNWAY CONSTRUCTION
(SCGB MK EQUITY, SCOG.KL)
SUNWAY CONSTRUCTION GROUP BHD Strong Earnings Momentum, Data Centre Proxy.
BUY (Maintained)
Liew Jin Sheng
liew.jin-sheng@ambankgroup.com
+603 2036 1687
Price
Key Changes
Rationale for report: Company Result
Financial Estimates
| YE to Dec | FY24 | FY25F | FY26F | FY27F |
|---|---|---|---|---|
| Revenue (RM mil) | 3,521.7 | 5,335.7 | 6,489.4 | 7,705.9 |
| Core net profit (RM mil) | 207.1 | 321.2 | 390.8 | 471.0 |
| FD Core EPS (sen) | 16.1 | 24.9 | 30.3 | 36.5 |
| FD Core EPS growth (%) | 41.3 | 55.0 | 21.7 | 20.5 |
| Consensus Net Profit (RM mil) | 302.7 | 329.9 | 364.9 | |
| DPS (sen) | 8.5 | 19.9 | 24.2 | 29.2 |
| PE (x) | 36.2 | 23.4 | 19.2 | 15.9 |
| EV/EBITDA (x) | 4.4 | 3.1 | 2.5 | 2.0 |
| Div yield (%) | 1.4 | 3.4 | 4.1 | 4.9 |
| ROE (%) | 24.4 | 35.3 | 39.8 | 44.1 |
| Net Gearing (%) | nm | nm | nm | nm |
Stock and Financial Data
| Shares Outstanding (million) | 258.6 |
| Market Cap (RMmil) | 1,504.9 |
| Book Value (RM/Share) | 0.68 |
| P/BV (X) | 8.5 |
| ROE (%) | 24.4 |
| Net Gearing (%) |
Investment Highlights
- We maintain our call on Sunway Construction Group Bhd (SCGB) at BUY with TP of RM6.70. SCGB’s 1HFY25 core net profit of RM176.3mil was within ours but above consensus expectations. Strong earnings growth was mainly driven by accelerated progress in the newer projects especially data centre projects. We like the group as the best proxy to the data centre theme, with additional upside from warehousing and semiconductor facilities as well as internal jobs from the parent company, Sunway Berhad. Our TP of RM6.70 is pegged to an unchanged 1-year forward PER of 22x, which is equivalent to +2SD to its 10-year average.
- BUY on SCGB at TP of RM6.70. Our TP of RM6.70 is based on FY26 PER of 22x, or +2SD to its 10-year average of 13.8x, which we believe is fair given the group’s visible orderbook prospect and support from the parent Sunway Berhad.
- Earnings beat consensus. 1HFY25 core net profit more than doubled YoY to RM176.3mil, which was within ours but above consensus expectations at 54.9% and 58.2% of respective full year estimates. Strong earnings growth was mainly driven by accelerated progress in the newer projects especially data centre projects. The group declared 7.3sen DPS, bringing YTD DPS to 12.3sen (1HFY24 : 3.5sen). That represents 100% payout ratio.
- On track to meet its orderbook replenishment target. The group’s current orderbook stands at RM6.7bil. YTD, SCGB has already secured RM3.8bil worth of works (53% data centre, 39% in-house, Singapore precast 8%), which is on track to achieve the guided orderbook replenishment of RM4.5-6bil for FY25. We gather that the group has an active tenderbook of close to RM14.8bil comprising mainly data centres, warehousing and semiconductor facilities.
- Strong foothold in advanced technology facilities construction space. To date, Suncon has delivered more than 100MW of data centre capacity and is currently working on five ongoing projects for four major multinational clients. Separately, Malaysian Anti-Corruption Commission has confirmed that SCGB is not under investigation in relation to a recent employee misconduct case.
Major Shareholders
- Sunway Holdings Sdn Bhd (54.1%)
- Sungei Way Corp Sdn Bhd (10.0%)
- EPF (4.2%)
- Free Float 26.6
- Avg Daily Value (RMmil) 40.6
Price performance
| 3mth | 6mth | 12mth | |
|---|---|---|---|
| Absolute (%) | 19.3 | 41.3 | 40.2 |
| Relative (%) | 16.3 | 40.3 | 45.1 |
EXHIBIT 1: 2QFY25 EARNINGS SUMMARY
| FYE Dec (RM mil) | 2QFY24 | 1QFY25 | 2QFY25 | QoQ (%) | YoY (%) | 1HFY24 | 1HFY25 | YoY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 651.2 | 1,400.5 | 1,476.9 | 5.5 | 126.8 | 1,256.0 | 2,877.4 | 129.1 |
| EBIT | 52.7 | 109.5 | 114.6 | 4.6 | 117.6 | 105.7 | 224.1 | 111.9 |
| PBT | 50.2 | 113.2 | 122.6 | 8.3 | 144.2 | 91.9 | 235.8 | 156.7 |
| Tax | (12.4) | (27.5) | (28.4) | 3.2 | 128.2 | (21.4) | (55.9) | nm |
| Minority Interest | (1.1) | 10.0 | 10.3 | 3.3 | nm | (0.8) | 20.3 | nm |
| PATAMI | 38.9 | 75.7 | 83.9 | 10.8 | 115.8 | 71.3 | 159.6 | 123.9 |
| Core Net Profit | 37.2 | 82.2 | 94.1 | 14.4 | 153.1 | 64.5 | 176.3 | 173.5 |
| Core EPS (sen) | 3.0 | 5.9 | 6.5 | 10.7 | 115.2 | 5.5 | 12.3 | 123.4 |
| DPS (sen) | 3.5 | 5.0 | 7.3 | 45.0 | 107.1 | 3.5 | 12.3 | 250.0 |
| Payout ratio (%) | 116 | 85 | 112 | 63 | 100 | |||
| Margins (%) | ||||||||
| EBIT margin (%) | 8.1 | 7.8 | 7.8 | (0.1ppt) | (0.3ppt) | 8.4 | 7.8 | (0.6ppt) |
| Pretax margin (%) | 7.7 | 8.1 | 8.3 | 0.2ppt | 0.6ppt | 7.3 | 8.2 | 0.9ppt |
| Effective tax rate (%) | 24.8 | 24.3 | 23.1 | (1.1ppt) | (1.6ppt) | 23.3 | 23.7 | 0.4ppt |
| Net profit margin (%) | 6.0 | 5.4 | 5.7 | 0.3ppt | (0.3ppt) | 5.7 | 5.5 | (0.1ppt) |
| Segmental Revenue | ||||||||
| Construction | 597.6 | 1,369.9 | 1,433.5 | 4.6 | 139.9 | 1,141.2 | 2,803.4 | 145.7 |
| Precast | 53.6 | 30.6 | 43.4 | 41.9 | (19.0) | 114.9 | 74.0 | (35.5) |
| Segmental Net Income | ||||||||
| Construction | 36.8 | 74.7 | 82.8 | 10.9 | 125.4 | 66.9 | 157.5 | 135.6 |
| Precast | 2.1 | 1.0 | 1.1 | 1.8 | (50.2) | 4.4 | 2.1 | (52.7) |
| Segmental Net Income Margin (%) | ||||||||
| Construction | 6.2 | 5.5 | 5.8 | 0.3ppt | (0.4ppt) | 5.9 | 5.6 | (0.2ppt) |
| Precast | 3.9 | 2.5 | 2.4 | (0.9ppt) | (1.5ppt) | 3.8 | 2.8 | (1.0ppt) |
Source: Company, AmInvestment Bank Bhd
Company profile
Established in 1981, Sunway Construction Group Bhd (SCGB) is a pure play construction company with turnkey capabilities. SCGB has a strong track record in buildings and public infrastructure works e.g. Kuala Lumpur Convention Centre, South Klang Valley Expressway, MRT Line 1 & 2. Additionally, the Company is involved in the manufacture and supply of precast concrete products with three manufacturing plants: Senai and Iskandar, Johor and Pulau Punggol Barat, Singapore. As part of Sunway Bhd (via a 55% equity stake), SCGB serves as the construction arm to the Group.
Investment thesis and catalysts
Proxy to data centre growth in Malaysia. According to Mordor Intelligence, Malaysia Data Centre Construction Market is set for explosive growth, with an estimated market size of USD2.8bil in 2024 and is projected to reach USD6.6bil by 2030, reflecting a 5 year CAGR of 15.03%. We believe SCGB is the main beneficiary of booming DC demand premised on strong brand identity and execution track record.
Orderbook support from Parent. SCGB has been involved in constructing Sunway Berhad’s key developments, thanks to its parent diversified portfolio which includes townships, hospitals and commercial buildings. This provides a steady pipeline of construction projects for SCGB. As of May 2025, internal projects accounted c.34% of total orderbook.
Valuation methodology
Our TP of RM6.70 is based on 22x FY26 PER, which is at +2SD to it 10 year average.
Risk factors
Key downside risks to our call:-
- Delay in project rollouts;
- Rising building material costs; and
- Project cost overrun.
EXHIBIT 2: VALUATIONS
| Target PE (x) | 22x |
| FY26 EPS | 0.30 |
| ESG premium | 3% |
| 12-month target price | 6.70 |
Source: AmInvestment Bank
EXHIBIT 3: ESG SCORECARD
| Environmental assessment | Parameters | Weightage | Rating | Rationale | |||
|---|---|---|---|---|---|---|---|
| 1 | Water usage | % of water sourced from surface | 20% | • | • | Reduced potable water demand by 11.3% in FY24 to 264,628 m3. | |
| 2 | Minimise waste generation | Recycled waste | 20% | • | 26% of waste diverted from landfill. Improved from 19.9% in 2023. | ||
| 3 | Scope 1 Emissions | tCO2e emitted | 20% | • | Huge increase in Scope 1 emissions to 12,283 tonnes vs 2023. | ||
| 4 | Scope 2 Emissions | tCO2e emitted | 20% | • | • | Scope 2 emissions remained stable. The level was 37.5% lower than 2020 levels after offset. | |
| 5 | Biodiversity Loss | Environment incidents with severe environmental damage | 20% | • | Zero incident | ||
| Weighted score for evironmental assessment | 100% | ||||||
| Social assessment | |||||||
| 1 | Health, safety & well-being | Number of fatalities & injuries | 25% | • | • | • | 0 fatalities & injuries in 2024 |
| 2 | Women in workforce | % of total workforce | 25% | • | • | 16.5% of workforce from 15.4% in FY23 | |
| 3 | Investment in employee training | RM | 25% | • | • | • | RM1.0mil in FY24 vs RM0.78mil in FY23 with more employees participating in training and higher average training hours per employee. |
| 4 | CSR programmes | RM | 25% | • | • | • | The amount contributed to societal causes rose to RM2.86mil in FY24 vs RM2.63mil in FY23. |
| Weighted score for social assessment | 100% | ||||||
| Governance assessment | |||||||
| 1 | Board age diversity | % under 60 years old | 25% | • | • | 22% | |
| 2 | Board women representation | % of total board directors | 25% | • | • | • | 33% |
| 3 | Independent board directors | % of total board directors | 25% | • | • | • | 67% independent non-executive directors. |
| 4 | Remuneration to directors | % of total staff costs | 25% | • | • | • | RM7.2mil – 3.6% of 2024 staff costs |
| Weighted score for governance assessment | 100% | ||||||
| Combined Score by respective Segments | |||||||
| Environmental score | 30% | • | • | ||||
| Social score | 30% | • | • | • | |||
| Governance score | 40% | • | • | • | |||
| Overall ESG Score | 100% | • | • | ||||
Source: Company, AmInvestment Bank
EXHIBIT 4: PB BAND CHART
Chart data and visualization omitted as per instructions.
EXHIBIT 5: PE BAND CHART
Chart data and visualization omitted as per instructions.
EXHIBIT 6: FINANCIAL DATA
Income Statement (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue | 2,671.2 | 3,521.7 | 5,335.7 | 6,489.4 | 7,705.9 |
| EBITDA | 245.3 | 279.4 | 460.4 | 561.1 | 676.9 |
| Depreciation/Amortisation | (21.0) | (17.3) | (14.3) | (14.8) | (15.4) |
| Operating income (EBIT) | 224.3 | 262.2 | 446.1 | 546.3 | 661.5 |
| Other income & associates | (14.1) | 0.3 | 5.3 | 3.2 | |
| Net interest | (21.5) | 10.5 | (6.5) | (8.1) | (9.0) |
| Exceptional items | |||||
| Pretax profit | 188.6 | 273.0 | 444.9 | 541.4 | 652.5 |
| Taxation | (42.8) | (75.9) | (123.8) | (150.6) | (181.5) |
| Minorities/pref dividends | 0.7 | 10.1 | |||
| Net profit | 146.6 | 207.1 | 321.2 | 390.8 | 471.0 |
| Core net profit | 146.6 | 207.1 | 321.2 | 390.8 | 471.0 |
Balance Sheet (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Fixed assets | 98.0 | 85.1 | 83.5 | 81.3 | 78.5 |
| Intangible assets | |||||
| Other long-term assets | 745.6 | 636.7 | 636.7 | 636.7 | 636.7 |
| Total non-current assets | 843.6 | 721.8 | 720.2 | 718.0 | 715.2 |
| Cash & equivalent | 470.4 | 1,015.8 | 1,042.1 | 1,328.4 | 1,620.2 |
| Stock | 46.4 | 43.3 | 59.2 | 72.0 | 85.4 |
| Trade debtors | 1,241.3 | 1,501.5 | 2,792.5 | 3,396.3 | 4,032.9 |
| Other current assets | 481.0 | 313.9 | 313.9 | 313.9 | 313.9 |
| Total current assets | 2,239.2 | 2,874.4 | 4,207.7 | 5,110.6 | 6,052.5 |
| Trade creditors | 921.1 | 1,564.0 | 2,618.7 | 3,184.2 | 3,775.0 |
| Short-term borrowings | 438.2 | 730.6 | 943.3 | 1,200.4 | 1,454.4 |
| Other current liabilities | 342.5 | 362.0 | 362.0 | 362.0 | 362.0 |
| Total current liabilities | 1,701.8 | 2,656.6 | 3,924.0 | 4,746.6 | 5,591.4 |
| Long-term borrowings | 487.7 | ||||
| Other long-term liabilities | 1.3 | 1.2 | 1.2 | 1.2 | 1.2 |
| Total long-term liabilities | 489.1 | 1.2 | 1.2 | 1.2 | 1.2 |
| Shareholders’ funds | 820.2 | 877.9 | 942.1 | 1,020.3 | 1,114.5 |
| Minority interests | 71.8 | 60.6 | 60.6 | 60.6 | 60.6 |
| BV/share (RM) | 0.64 | 0.68 | 0.73 | 0.79 | 0.86 |
Cash Flow (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Pretax profit | 188.6 | 273.0 | 444.9 | 541.4 | 652.5 |
| Depreciation/Amortisation | 21.0 | 17.3 | 14.3 | 14.8 | 15.4 |
| Net change in working capital | |||||
| Others | (509.0) | 426.2 | (376.0) | (201.7) | (240.8) |
| Cash flow from operations | (299.4) | 716.4 | 83.1 | 354.6 | 427.1 |
| Capital expenditure | (18.9) | (9.4) | (12.6) | (12.6) | (12.6) |
| Net investments & sale of fixed assets | 2.0 | 12.7 | |||
| Others | (58.0) | (581.3) | (83.1) | (354.6) | (427.1) |
| Cash flow from investing | (62.9) | 138.4 | (12.6) | (12.6) | (12.6) |
| Debt raised/(repaid) | 426.9 | (163.6) | 212.7 | 257.0 | 254.0 |
| Equity raised/(repaid) | |||||
| Dividends paid | (71.6) | (116.0) | (256.9) | (312.6) | (376.8) |
| Others | (17.9) | (23.7) | |||
| Cash flow from financing | 337.4 | (303.4) | (44.2) | (55.6) | (122.7) |
| Net cash flow | (24.8) | 551.5 | 26.3 | 286.4 | 291.8 |
| Net cash/(debt) b/f | 407.7 | 384.0 | 936.3 | 962.6 | 1,249.0 |
| Net cash/(debt) c/f | 470.4 | 1,015.8 | 1,042.1 | 1,328.4 | 1,620.2 |
Key Ratios (YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | 23.9 | 31.8 | 51.5 | 21.6 | 18.7 |
| EBITDA growth (%) | 16.7 | 13.9 | 64.8 | 21.9 | 20.6 |
| Pretax margin (%) | 7.1 | 7.8 | 8.3 | 8.3 | 8.5 |
| Net profit margin (%) | 5.5 | 5.9 | 6.0 | 6.0 | 6.1 |
| Interest cover (x) | 10.4 | nm | 68.5 | 67.4 | 73.3 |
| Effective tax rate (%) | 22.7 | 27.8 | 27.8 | 27.8 | 27.8 |
| Dividend payout (%) | 52.8 | 37.3 | 80.0 | 80.0 | 80.0 |
| Debtors turnover (days) | 131 | 142 | 147 | 174 | 176 |
| Stock turnover (days) | 7 | 5 | 4 | 4 | 4 |
| Creditors turnover (days) | 112 | 129 | 143 | 163 | 165 |
Source: Company, AmInvestment Bank Bhd estimates
DISCLOSURE AND DISCLAIMER
This report is prepared for information purposes only and it is issued by AmInvestment Bank Berhad (“AmInvestment”) without regard to your individual financial circumstances and objectives. Nothing in this report shall constitute an offer to sell, warranty, representation, recommendation, legal, accounting or tax advice, solicitation or expression of views to influence any one to buy or sell any real estate, securities, stocks, foreign exchange, futures or investment products. AmInvestment recommends that you evaluate a particular investment or strategy based on your individual circumstances and objectives and/or seek financial, legal or other advice on the appropriateness of the particular investment or strategy.
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