Sunway Construction Group Berhad
(5263 | SCGB MK) Main | Construction
SHARIAH Compliant
FTSE4Good
Sunway Construction Group Berhad: Earnings Surge on DC Momentum – Maintain BUY
Revised Target Price RM6.53
(from RM6.44)
Earnings Surge on DC Momentum
Maintain BUY. We are increasing our earnings estimates for FY25E/FY26F/FY27F by +12.6%/+9.10%/+19.5% respectively to account for the stronger-than-expected performance in 2QFY25. We are also maintaining our BUY call on SunCon with an upgraded target price of RM6.53, pegging its increased FY26F EPS of 24.2 sen to a PER of 27x, which is in line with its two-year mean. SunCon continues to benefit from a robust project pipeline and steady construction sector momentum, with the sector expanding +12.9% yoy in 2QCY25. Its data centre portfolio remains a key earnings driver, with multiple phases of development still anticipated, supported by substantial land acquisitions by global operators and aggressive ongoing tender activity. As at Jun-25, SunCon’s outstanding order book stood at RM6.72b, with nearly half comprising DC projects, including the latest RM1.16b general contractor works for two data centre packages awarded by a U.S.-based MNC. Beyond the ATF segment, the group is diversifying into large-scale infrastructure, renewable energy projects, and private finance initiatives, while continuing to build on its track record in commercial and in-house works from Sunway Bhd.
| RETURN STATISTICS | |
|---|---|
| Price @ 21st August 2025 (RM) | 5.85 |
| Expected share price return (%) | +11.6 |
| Expected dividend yield (%) | +2.1 |
| Expected total return (%) | +13.7 |
Above expectations. Sunway Construction Group Berhad’s (SunCon’s) core net profit for 2QFY25 came in +>100% yoy higher at RM92.3m. The 2QFY25 revenue also encountered an increase of +>100% yoy to RM1.48b, driven by an improved performance of their construction segment. The cumulative 1HFY25 core earnings grew by >100% yoy to RM171.4m, exceeding expectations at 62.6% and 56.6% of ours and consensus’ full-year core net profit projections. The earnings strength was primarily driven by accelerated progress billings from several existing projects. The group declared its second sizeable interim dividend for FY25 at 7.25sen, bringing total dividends for FY25 thus far to 12.25sen per share.
Construction segment. The group’s construction revenue grew +>100%yoy during the quarter to RM1.43b, generating a PBT of RM121.4m, 2.6x higher than 2QFY24’s PBT. This was attributable to accelerated execution across several data centre projects, especially with the Yondr data centre in Sedenak Tech Park, Johor as well as the K2 data centre. Management previously guided that the Yondr data centre is progressing approximately six months ahead of schedule with completion slated for end-CY25. There was also an improvement in PBT margin to 8.5%, as compared to 7.8% in 2QFY24. We expect the margins at the current level to be sustainable, if not better in future quarters in line with revenue turnover. It has completed one DC project and are currently managing five ongoing projects.
Precast segment. The group’s Precast segment revenue posted a -19.0%yoy decrease in revenue during 2QFY25 to RM43.4m. This led to a decline in the division’s PBT by -63.6% yoy to RM1.2m. This lower year-on-year revenue was primarily due to 2QFY24’s strong performance driven by contributions from projects at peak delivery stage as well as revision of provisions for those completed projects which aided profit margins. To recall our last engagement with management, they guided that project progress is heavily dependent on main contractors’ execution schedules.
| INVESTMENT STATISTICS | |||
|---|---|---|---|
| FYE Dec | 2025F | 2026F | 2027F |
| Revenue | 4930.4 | 5423.4 | 5694.6 |
| Operating Profit | 414.2 | 428.4 | 472.6 |
| Profit Before Tax | 404.3 | 406.8 | 461.3 |
| Core Net Profit | 308.1 | 313.4 | 360.4 |
| Core EPS (sen) | 23.8 | 24.2 | 27.8 |
| DPS (sen) | 12.25 | 12.5 | 12.5 |
| Dividend Yield | 2.1 | 2.1 | 2.1 |
| KEY STATISTICS | |
|---|---|
| FBM KLCI | 1,592.87 |
| Issued shares (m) | 1292.90 |
| Estimated free float (%) | 27.41 |
| Market Capitalisation (RM’m) | 7,675.39 |
| 52-wk price range | RM3.26-RM6.27 |
| 3-mth average daily volume (m) | 7.34 |
| 3-mth average daily value (RM’m) | 40.70 |
| Top Shareholders (%) | |
| Sunway Holdings Sdn Bhd | 53.62 |
| Sungei Way Corp Sdn Bhd | 9.91 |
| Employees Provident Fund Board | 4.26 |
Hence, any slowdown by main contractors directly impacts SunCon’s precast earnings. Management noted that revenue is expected to remain subdued throughout FY25, especially since most existing precast contracts have already encountered delays by main contractors in Singapore. Management anticipates a meaningful rebound in the precast segment only in FY26, as execution momentum gradually recovers. PBT margins also declined to 2.8% in the quarter as compared to 6.2% in 2QFY24 in line with the lower revenue recorded. In Feb-25, Singapore’s Housing and Development Board (HDB) launched 5,032 Build-To-Order flats for sale. Since >90% of the group’s precast segment sales are tied to Singapore HDB flats, prospects for FY26 remain positive for SunCon’s precast business.
RM6.72b outstanding order book. As at Jun-25, the group has secured RM3.81b or 63.4% of its FY25 replenishment target of RM4.5-6.0b. Among new orders secured YTD, data centres account for approximately 53.0%. SunCon’s outstanding order book as at Jun-25 stood at RM6.72b, providing strong earnings visibility up to FY27. About 45% of these are data centre projects while 37% are in-house projects from its parent company, Sunway Bhd. Management is actively bidding for jobs, with a tender book of RM14.8b. Jobs on the radar primarily include data centres, public and commercial tenders such as the Penang LRT, MRT3 and the Penang International Airport expansion. SunCon has also started exploring renewable energy projects as well as projects requiring contractor financing or private financial initiatives. Internally, SunCon continues supporting Sunway Berhad’s development pipeline, which includes hospitals, integrated developments, commercial buildings and transit-oriented developments (TOD).
SUNWAY CONSTRUCTION: 2QFY25 RESULTS SUMMARY
All in RM’m unless stated otherwise
| Income Statement | Quarterly Results | Cumulative | ||||||
|---|---|---|---|---|---|---|---|---|
| 2QFY25 | 1QFY25 | 2QFY24 | QoQ | YoY | 6MFY25 | 6MFY24 | YoY | |
| Revenue | 1,476.9 | 1,400.5 | 651.2 | 5.5% | 126.8% | 2,877.4 | 1,256.0 | >100% |
| Net Operating Expenses | (1,359.4) | (1,291.0) | (600.2) | -5.3% | -126.5% | (2,650.4) | (1,150.3) | >-100% |
| Operating Profit | 114.6 | 109.5 | 52.7 | 4.6% | 117.6% | 224.1 | 105.7 | >100% |
| Finance Income | 18.0 | 14.3 | 15.3 | 26.0% | 17.2% | 32.2 | 20.1 | 60.6% |
| Finance Costs | (12.8) | (12.9) | (17.8) | 0.8% | 28.2% | (25.7) | (34.0) | 24.5% |
| JV and Associates | 2.9 | 2.3 | 0.0 | 23.6% | 5.2 | 0.0 | ||
| Profit Before Tax | 122.6 | 113.2 | 50.2 | 8.3% | >100% | 235.8 | 91.9 | >100% |
| Tax Expense | (28.4) | (27.5) | (12.4) | -3.2% | >-100% | (55.9) | (21.4) | >-100% |
| Minority Interest | 10.3 | 10.0 | (1.1) | 3.4% | >100% | 20.4 | (0.8) | >100% |
| Reported Net Profit | 83.9 | 75.7 | 38.9 | 10.8% | >100% | 159.6 | 71.3 | >100% |
| Core Net Profit | 92.3 | 79.1 | 38.9 | 16.6% | >100% | 171.4 | 71.1 | >100% |
FINANCIAL SUMMARY
| Profit or Loss (RM’m) | Cash Flow (RM’m) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2023A | 2024A | 2025E | 2026F | 2027F | 2023A | 2024A | 2025E | 2026F | 2027F | ||
| Revenue | 2671.2 | 3521.7 | 4930.4 | 5423.4 | 5694.6 | PBT | 188.6 | 273.0 | 404.3 | 406.8 | 461.3 |
| Net operating expenses | -2501.0 | -3300.1 | -3484.6 | -3642.7 | -3824.8 | Depreciation & amortisation | 21.0 | 17.3 | 28.8 | 27.4 | 27.4 |
| Operating profit | 224.3 | 262.2 | 414.2 | 428.4 | 472.6 | Changes in working capital | -516.6 | -534.7 | -23.9 | -16.7 | -16.7 |
| Profit before tax | 188.6 | 273.0 | 404.3 | 406.8 | 461.3 | Operating cash flow | -299.4 | 716.4 | 297.7 | 258.2 | 279.3 |
| Net profit | 145.1 | 186.9 | 308.1 | 313.4 | 360.4 | Capital expenditure | -18.9 | -9.4 | -25.0 | -30.0 | -30.0 |
| Core net profit | 143.9 | 179.9 | 308.1 | 313.4 | 360.4 | Investing cash flow | -62.9 | 138.4 | 184.8 | 189.8 | 189.8 |
| Core EPS (sen) | 11.1 | 13.9 | 23.8 | 24.2 | 27.8 | Debt raised/(repaid) | 420.9 | -167.2 | -145.4 | -145.4 | -145.4 |
| DPS (sen) | 6.0 | 8.5 | 12.25 | 12.5 | 12.5 | Dividends paid | -70.9 | -116.0 | -77.4 | -77.4 | -77.4 |
| Balance Sheet (RM’m) | Financing cash flow | 337.4 | -303.4 | -222.8 | -222.8 | -222.8 | |||||
| Fixed assets | 98.6 | 85.4 | 130.6 | 124.1 | 117.9 | Net cash flow | -24.8 | 551.5 | 259.8 | 225.2 | 246.3 |
| Other investments and assets | 745.1 | 636.4 | 518.9 | 532.0 | 532.0 | Beginning cash flow | 407.7 | 384.0 | 936.3 | 1196.0 | 1421.2 |
| Non-current assets | 843.6 | 721.8 | 649.6 | 656.1 | 649.9 | Ending cash flow | 384.0 | 936.3 | 1196.0 | 1421.2 | 1667.6 |
| Cash | 470.4 | 1,015.8 | 548.3 | 520.8 | 494.8 | Profitability Ratios (%) | |||||
| Trade debtors | 1,595.6 | 1,795.1 | 1,304.2 | 1,369.4 | 1,369.4 | Operating profit margin | 8.4% | 7.4% | 8.4% | 7.9% | 8.3% |
| Current assets | 2,239.2 | 2,874.4 | 2,013.5 | 2,051.3 | 2,025.2 | PBT margin | 7.1% | 7.8% | 8.2% | 7.5% | 8.1% |
| Trade creditors | 1,242.5 | 1,912.7 | 1,277.4 | 1,335.4 | 1,335.4 | PAT margin | 5.4% | 5.3% | 6.3% | 5.8% | 6.3% |
| Short-term debt | 438.2 | 730.6 | 197.6 | 217.3 | 239.1 | Core PAT margin | 5.4% | 5.1% | 6.3% | 5.8% | 6.3% |
| Current liabilities | 1,701.8 | 2,656.6 | 1,491.6 | 1,569.4 | 1,591.1 | ||||||
| Long-term debt | 487.7 | 0.0 | 99.3 | 118.3 | 118.3 | ||||||
| Non-current liabilities | 489.1 | 1.2 | 102.4 | -47.2 | -281.7 | ||||||
| Share capital | 258.6 | 258.6 | 258.6 | 258.6 | 258.6 | ||||||
| Retained earnings | 590.0 | 660.9 | 810.4 | 926.7 | 1,107.2 | ||||||
| Equity | 892.0 | 938.5 | 1,069.0 | 1,185.3 | 1,365.8 | ||||||
Source: Bloomberg, MBSBR
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(Bank Pelaburan) (A Participating Organisation of Bursa Malaysia Securities Berhad)
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MBSB INVESTMENT BANK (formerly known MIDF AMANAH INVESTMENT BANK): GUIDE TO RECOMMENDATIONS
STOCK RECOMMENDATIONS
- Total return is expected to be >10% over the next 12 months.
- The stock price is expected to rise by >10% within 3 months after a Trading Buy rating has been assigned due to positive news flow.
- Total return is expected to be between -10% and +10% over the next 12 months.
- Total return is expected to be <-10% over the next 12 months.
- The stock price is expected to fall by >10% within 3 months after a Trading Sell rating has been assigned due to negative news flow.
SECTOR RECOMMENDATIONS
- The sector is expected to outperform the overall market over the next 12 months.
- The sector is to perform in line with the overall market over the next 12 months.
- The sector is expected to underperform the overall market over the next 12 months.
ESG RECOMMENDATIONS* – source Bursa Malaysia and FTSE Russell
- Top 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- Top 26-50% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- Top 51%-75% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
- Bottom 25% by ESG Ratings amongst PLCs in FBM EMAS that have been assessed by FTSE Russell
* ESG Ratings of PLCs in FBM EMAS that have been assessed by FTSE Russell in accordance with FTSE Russell ESG Ratings Methodology
