• Still BUY, with new MYR6.55 TP from MYR6.80, 19% upside and c.3% yield. Sunway Construction announced that the Malaysian Anti-Corruption Commission (MACC) has initiated an inquiry against one of its employees, specifically in relation to the employee’s engagements with certain subcontractors. Management clarified that this isolated investigation does not concern the way SCGB secures contracts from its clients.
• Next step of action. SCGB has been and continues to be fully cooperative with the MACC to facilitate a thorough investigation. The group is also currently seeking legal counsel to evaluate the appropriate actions to be taken on certain sub-contracts and parties. In the meantime, SCGB is proactively reaching out to its clients (even prospective ones) to clarify on the latest incident involving its employee.
• SCGB remains committed to highest ethical standards. SCGB has established robust mechanisms and systems to uphold anti-corruption compliance. The adoption and certification of the ISO 37001 Anti-Bribery Management System (ABMS) demonstrates SCGB’s commitment to ethical business practices, requiring substantial financial investment in system development, employee training, independent audits, and continuous monitoring. The group also obtained the ISO 37001:2016 ABMS certification in May 2025 which represents a significant investment in system development, employee training, audits, and continuous monitoring to uphold compliance. In terms of tendering exercises, the group has implemented an e-bidding system to ensure transparency and paperless transactions.
• Earnings estimates. No changes to our earnings estimates but we flag risks in terms of securing jobs moving forward. We are also taking the opportunity to dial back on our ESG scoring, by lowering it to 3.1 from 3.3 previously after tweaking the Governance (G) score downwards. We envisage that SCGB may continuously improve its internal policies further moving forward. Post ESG score adjustment – we arrive at a new TP of MYR6.55 (from MYR6.80) which bakes in a 2% ESG premium based on the new ESG score of 3.1. Our TP is derived by pegging FY26F EPS to an unchanged target P/E of 23.5x. The stock is currently trading at a 20x FY26F P/E which we view as still having room to go higher (provided that data centre (DC) wins come in). SCGB was trading around 15-17x during the 2017 construction upcycle (with no DC factor).
• A key rerating catalyst aside from new DC wins would be if SCGB secures any packages from the Penang Light Rail Transit project as the last infrastructure job it won was the Rapid Transit System Link Package 1B and Package 5 back in Mar 2023. Key risk: Lower-than expected job wins.

Forecasts and Valuation

Trend analysis

While Scope 1 emissions increased in FY24 by 65% YoY, total emissions have dropped by 15% in FY24

Latest ESG-Related Developments

As part of its continuous sustainability journey, FY24 marked a significant milestone in strengthening SCGB’s greenhouse gas (GHG) emissions accounting.

SCGB integrated the latest emission factors and expanded its Scope 3 coverage to include 6 out of 15 categories as part of our transition to IFRS S2. These enhancements have improved the accuracy and transparency of its carbon footprint assessment, underscoring commitment to data-driven climate action and reinforcing efforts to drive meaningful decarbonisation across the group’s value chain.

The Malaysian Anti-Corruption Commission (MACC) has initiated an inquiry against one of its employees, specifically in relation to the employee’s engagements with certain subcontractors.

ESG Rating History

The ESG rating was consistent at 3.3 until a recent revision in July 2025, where it was lowered to 3.1 following a downward adjustment in the Governance (G) score.