SUNCON (5263): Data Center Boom Powers Construction Outlook Despite Chip Freeze Concerns
Summary (TL;DR):
- Research Firm: RHB-OSK Investment Bank
- Subject: SUNCON / SUNCON (5263)
- Core Rating: BUY
- Target Price / Top Picks: MYR 6.80
- One-Liner: Despite potential US chip restrictions, Sunway Construction is poised to benefit significantly from continued data center investments by US tech giants and “friendly nations” in Malaysia.
Report at a Glance
RHB-OSK Investment Bank released its latest research report on SUNCON on 2025-07-07, maintaining a “BUY“ rating with a target price of MYR 6.80. The core thesis of the report is that the Malaysian construction sector, particularly companies involved in data center (DC) construction like Sunway Construction, will remain robust despite potential US restrictions on AI chip shipments to Malaysia. This is due to anticipated exemptions for US-based and ‘friendly nation’ firms, ensuring continued significant investments in data center setups.
Investment Thesis (The Bull Case)
- Point 1: US tech giants (Google, Microsoft, Oracle, Amazon Web Services, EdgeConneX) and other “friendly nations” (UK, Netherlands, Australia, Japan) are expected to continue their massive planned data center investments in Malaysia, potentially via license exemptions or Validated End User (VEU) status, mitigating the impact of chip restrictions.
- Point 2: A substantial pipeline of data center projects is anticipated, with an estimated potential construction value of MYR7.4bn from five specific DC tenders (Elmina Business Park Phase 2, Eco Business Park V at Puncak Alam).
- Point 3 / Key Beneficiaries: Gamuda, Sunway Construction (SCGB), and IJM Corp are well-positioned as their current and near-term data center jobs primarily originate from US-based corporations or DC players from countries deemed friendly by the US. Other key non-US DC players expanding in Malaysia include Yondr, Vantage, AirTrunk, and NextDC.
Potential Risks (The Bear Case)
- Risk 1: An unexpected slowdown in data center builds by US-based data center developers in Malaysia.
- Risk 2: Not explicitly detailed in the provided report snippet.
- Risk 3: Not explicitly detailed in the provided report snippet.
Financial Forecast Summary
The analyst’s financial projections for the coming years are as follows:
| Fiscal Year (YE to December) | FY25F | FY26F | FY27F |
|---|---|---|---|
| Revenue (RM mil) | [N/A in report] | [N/A in report] | [N/A in report] |
| Net Profit (RM mil) | [N/A in report] | [N/A in report] | [N/A in report] |
| EPS (sen) | [N/A in report] | [N/A in report] | [N/A in report] |
| DPS (sen) | [N/A in report] | [N/A in report] | [N/A in report] |
| Dividend Yield (%) | [N/A in report] | [N/A in report] | [N/A in report] |
| P/E Ratio (x) | 25.6 | [N/A in report] | [N/A in report] |
(Source: RHB-OSK Investment Bank research report)
Valuation & Target Price
| Rating | BUY |
| Last Close Price | [Not available in report] |
| Target Price (TP) | MYR 6.80 |
| Valuation Methodology | The report is a sector update, and the specific valuation methodology for SUNCON’s MYR 6.80 target price is not explicitly detailed within the provided text. |
Analyst’s Conclusion
- Overall Stance: RHB-OSK maintains an “OVERWEIGHT” rating on the Construction sector, with SUNCON as a “BUY” and a Top Pick, indicating strong confidence in its outlook driven by the data center boom.
- Key Catalyst/Strength: The continued significant investments in data center infrastructure in Malaysia by major US tech companies and “friendly nations,” which are expected to proceed despite potential AI chip restrictions due to anticipated exemptions.
- Major Headwind/Risk: An unexpected slowdown or halt in data center construction projects by US-based developers in Malaysia would be the primary downside risk to the sector’s positive outlook.
- What to Watch: Investors should monitor the finalization of US draft rules on AI chip shipments, the potential for Validated End User (VEU) status for tech giants, and the outcomes of upcoming data center tenders (e.g., Elmina Business Park Phase 2, Eco Business Park V at Puncak Alam) expected between July-September.
Disclaimer: This article is a summary and interpretation of a research report published by RHB-OSK Investment Bank on 2025-07-07. All information is for reference purposes only and does not constitute investment advice. Investors should conduct their own independent research and due diligence and assume all associated risks.
