Sunway Construction in prime position to secure more contracts from Yellowwood Properties, says HLIB Research

NST Wed, Jan 04, 2023 10:04am - 1 year View Original

KUALA LUMPUR: Sunway Construction Bhd (SunCon) will be in a prime position to secure additional work should there be expansion plans from Yellowwood Properties Sdn Bhd, said Hong Leong Investment Bank (HLIB) Research.

On December 31, 2022, SunCon entered into a contract with Yellowwood Properties carrying an approximate contract value of RM1.7 billion. 

The contract is for the design, development, construction and completion of a data centre located in Sedenak Tech Park (STeP) in Johor.

The research house said this win takes the financial year 2022 (FY22) contract wins to RM2.6 billion, surpassing the research firm and the consensus expectations. 

"Accounting for this, the orderbook increased by 42 per cent to RM5.7 billion. As a result, recognition ramp-up should be quick with a short construction period. 

"We believe SunCon will be in a prime position to secure additional work should Yellowwood explore expansion opportunities for the said project," it said.

SunCon expects to ink the final engineering, procurement and construction (EPC) agreement with Toyo Ink worth RM5.8 billion.

This would result in doubling the unbilled orderbook to a record high of more than RM10 billion. 

"Nevertheless, we have left the project unaccounted for in our forecasts pending financial close. 

"We gather that EXIM Bank of Malaysia had offered their services as lead arranger and bookrunner for the project's syndicated financing facilities in mid-November 2022.

"We increase our FY23 and FY24 core net profit forecasts by 14.2 per cent and 30.3 per cent, respectively. Therefore, we maintain a 'Buy' call with a higher target price of RM2.06," it added.

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