In a note today, the research house has maintained a “buy” call on the group, revising its target price (TP) to RM2.08 from RM2.05 previously.
The recent adjustment suggests an 18% upside along with a 4% yield for financial year 2023 (FY2023).
While the revision indicates no changes to SunCon’s earnings forecasts, it reflects a 15.5 times price-earnings ratio (PER) based on the group’s projected FY2024 earnings per share.
This recommendation comes on the back of key catalysts such as the Mass Rapid Transit 3 launch, potential wins from the Johor Bahru-Singapore Rapid Transit System link, and the reinstatement of previously excluded Light Rail Transit 3 stations.
All of these are valued at some RM1 billion, said RHB.
Meanwhile, the research house anticipates SunCon’s core earnings to range between RM30 million and RM40 million in the second quarter of 2023 (Q2 2023), compared to RM26 million in the previous quarter.
This expansion is supported by the continued progress of projects that were in their initial stages in Q1 2023.
“SunCon’s potential involvement in the Song Hau 2 power plant in Vietnam plus strong data centre demand in Malaysia may mitigate any downside risks from the local construction sector,” it added.
RHB also predicts that SunCon will reap benefits from the recently launched National Energy Transition Roadmap (NETR) through engineering, procurement, construction, and commissioning (EPCC) contracts for solar power plants.
At present, about 7% (RM420 million) of SunCon’s total order book pertains to sustainable energy initiatives.
The largest outstanding order is the construction of a 50MW solar power plant in Perak for Gopeng Bhd, valued at RM166 million.
Furthermore, the potential financial close of the Song Hau 2 power plant venture in Vietnam, valued at RM6 billion, could enhance SunCon’s earnings by 30% to 35% in FY2024-2025, said RHB.
The statistics department reported today that construction activity in Q2 2023 has grown 8.1% year-on-year (y-o-y) in value of work done to RM32.4 billion, the fifth consecutive quarterly expansion since Q2 2022.
As at 5pm, SunCon’s share price was down by 3 sen or 1.7% at RM1.73, valuing the company at RM2.24 billion.