Its shares tumbled as much 17.6% yesterday after it announced in a bourse filing the Malaysian Anti-Corruption Commission (MACC) had initiated an investigation on the employee.
The stock continued falling today and was down 3.5% or 19 sen to RM5.30 at 4.15pm, valuing the company at RM6.96 billion. Despite the fall, the shares have surged 40% over the past six months on the back of its ability to compete successfully for data centre construction jobs.
However, the falling share price is the least of its worries compared to the potential damage the episode may inflict on the Sunway Group’s squeaky-clean image.
The construction company is a subsidiary of Sunway Bhd, which has a 54.55% stake through Sunway Holdings Sdn Bhd.
In a note today, TA Research said it was “surprised by the development, particularly given SunCon’s strong reputation for corporate governance” and its established suite of compliance policies.
The research house said the reputational damage inflicted on the group is not quantifiable at this juncture, and the negative news flow may weigh on its near-term ability to secure new contracts. This uncertainty is likely to persist until the investigation is concluded, it added.
“Furthermore, we do not rule out the possibility that new clients may impose more stringent due diligence or require additional assurance on project execution standards – potentially leading to delays in new project awards.
“Against this backdrop, we remain cautious on the group’s near-term job replenishment prospects,” said TA, which maintained its “sell” call and cut its target price (TP) to RM5.59 from RM5.76 previously.
Nevertheless, TA said it was reassured the case appears to involve misconduct in a personal capacity, rather than “systemic failure”.
“We believe it is unlikely to compromise SunCon’s relationships with existing clients,” it added.
Advantage to rivals
Meanwhile, CGS International noted that while SunCon maintains this is an isolated incident with no senior management involvement, reputational risks could temporarily provide advantage to rivals like Gamuda Bhd and IJM Corp Bhd.
“This may impact some of SunCon’s ongoing tenders, especially in the data centre space, of which we understand there are seven to eight totalling RM14 billion,” it said.
However, given its strong brand equity and parentage, CGS thinks SunCon will be able to recover from this without impacting its new order wins materially over the longer term.
It noted that SunCon’s year-to-date FY2025 wins amount to RM3.5 billion and its order book stood at RM7.9 billion as at June, with data centres making up 49%.
The revelation of the anti-graft watchdog’s probe on the SunCon employee comes on the heels of MACC’s investigation dubbed Op Ways since last Thursday, over alleged corruption involving a data centre construction project tender in Johor worth some RM180 million.
The operation resulted in the arrest of a manager of a construction company, alongside his wife and two men in the Klang Valley.