SUNCON: Takeover Bid Signals New Growth Phase for Infrastructure Player

A significant corporate development is set to redefine the landscape for a prominent infrastructure and construction group, following a conditional voluntary takeover offer (VTO) from a key industry peer. The proposed acquisition, valued at MYR3.15 per share, is seen by analysts as a strategic move to unlock substantial synergies and enhance market position.

The offer, which involves a consideration of 10% cash and 90% in new shares of the acquiring entity, implies a favourable valuation for the target company, with an estimated FY26F (March) Price-to-Earnings (P/E) ratio of 22.8x and a Price-to-Book Value (P/BV) of 1.05x. This valuation is considered attractive when compared to the target company’s five-year historical average P/E of approximately 15.6x.

Strategic Rationale and Enhanced Outlook

Analysts highlight several compelling reasons behind the proposed merger. The combination is expected to effectively double the scale of the business, achieving a pro-forma revenue of MYR17.1 billion for the trailing 12-month period ended September 2025. Furthermore, the deal promises streamlined management through a consolidated platform, improving coordination across all operational layers. The resulting larger market capitalisation and increased free float are anticipated to attract further institutional investor interest, thereby boosting trading liquidity.

Synergies are also expected from the acquirer’s superior Gross Development Value (GDV) per acre (MYR30.9 million compared to the target’s MYR13.6 million), suggesting an enhanced ability to maximise landbank value and other potential collaborations, particularly with the acquiring entity’s construction arm. The combined entity would command a formidable MYR13.0 billion order book and a substantial landbank of 5,685 acres, alongside a potential GDV of MYR118.1 billion, signaling robust long-term growth prospects.

Analyst Rating and Outlook

Despite the offer price being slightly lower than its previous Sum-of-the-Parts (SOP) derived target price, the research house views the proposed VTO as a significant opportunity for shareholders to participate in the upside potential of a larger, more diversified entity. Consequently, the firm maintains its “Buy” recommendation, while adjusting its target price to MYR3.15 per share to align with the takeover offer.

The transaction is expected to conclude by the third quarter of calendar year 2026, contingent upon the acquiring entity securing more than 50% of the target company’s voting shares. A key risk identified is the possibility of shareholders preferring a higher cash component in the offer rather than the proposed 10% cash and 90% shares.