SUNCON: M&E Specialist Reports Robust Growth, Fair Value Set at MYR0.52 Amid Strong Order Book

An investment bank has issued a “BUY” recommendation for a mechanical and electrical (M&E) engineering solutions provider, setting a Fair Value (FV) of MYR0.52, representing a significant upside of 37% from its IPO price of MYR0.38. This positive outlook follows the company’s robust financial performance, driven by strong revenue growth and healthy gross profit margins.

Performance Review

The M&E specialist reported impressive financial results for the six-month financial period ended September 2025 (6MFY25), with revenue surging by 159% year-on-year to MYR51.6 million. Net profit also saw substantial growth, increasing by 85% year-on-year during the same period. This strong performance was primarily attributed to higher progress billings from industrial projects, particularly the Valdor Industrial Park Project and the Bandar Sri Iskandar Project. Over a two-year period (FY23-FY25), the company recorded an earnings Compound Annual Growth Rate (CAGR) of 257%, underpinned by robust topline expansion, with revenue growth of 95% in FY24 and 60% in FY25, while maintaining healthy Gross Profit Margins (GPMs) which improved to 24.4% in FY25 from 14.8% in FY23. Although net margin moderated slightly to 9.3% in 6MFY25 due to a higher effective tax rate and increased administrative expenses associated with business expansion and IPO preparation, gross margins remained relatively stable.

Key Growth Drivers

The industrial segment remains the dominant revenue contributor, accounting for 70.5% of revenue in 6MFY25. The company has also successfully diversified its geographical footprint, with Penang’s contribution to revenue significantly increasing to 36.0% in 6MFY25 from a mere 0.3% a year ago, alongside sustained contributions from Perak (44.6%) and Selangor (8.7%). These shifts indicate a successful strategy to broaden its market reach beyond its traditional home state.

Future Outlook and Strategy

The company’s future prospects are bolstered by a substantial outstanding order book of MYR176.1 million across 64 ongoing projects as of December 31, 2025, largely comprising industrial projects. With a tender book valued at approximately MYR760 million, analysts project a 15% success rate, translating to potential job wins of MYR110 million for FY27F, with an anticipated higher job replenishment of MYR140 million for FY28F. Management expects earnings to expand at a 3-year (FY25-28F) CAGR of 29%. This growth is expected to be driven by a strong presence in Perak, which is poised to benefit from major industrial developments such as the Lumut Maritime Industrial City (LuMIC), Silver Valley Technology Park, and Kerian Integrated Green Industrial Park. Additionally, the company is strategically focusing on clean energy infrastructure projects, including solar farm interconnection facilities and battery energy storage systems, and plans to expand its workforce to enhance M&E operational capacity.

Key Risks

Despite the positive outlook, the report highlights several key risks. These include a relatively high geographical concentration of projects in Perak and Penang, the project-based nature of its revenue with no significant recurring income, potential cost overruns on fixed-price contracts, and a dependency on key management and talent.

Valuation and Recommendation

The investment bank ascribed an 11x price-to-earnings (P/E) multiple to FY27F earnings, arriving at a Fair Value of MYR0.52. This valuation is set at a discount to the peer one-year forward P/E average of 19.6x, reflecting the company’s smaller indicative market capitalisation compared to larger-cap contractors. Given the substantial upside to the Fair Value, the investment bank reiterates a “BUY” recommendation for the stock.