Initiating Coverage 30 June 2016 Sunway Construction Group OUTPERFORM Price: RM1. 58 Bright All The Way Target Price: RM 1.81 By Adrian Ng l
[email protected] We initiate coverage on Sunway Construction Group (SUNCON) with Share Price Performance an OUTPERFORM rating and Target Price (TP) of RM1.81 based on SoP which implies FY17E PER of 15.7x. Investment merits include: (i) its well-integrated construction setup, (ii) healthy orderbook of RM5.0b with 2-3 years’ visibility, (iii) major a beneficiary of infrastructure play, (iv) well-supported by parent company, (v) reputable pre-cast division benefiting from Singapore public housing, (vi) dividend policy of 35% DPR with more potential upside, and (vii) strong balance sheet with net cash position. A One-stop Contractor. We like the fact that SUNCON is a well-integrated construction company offering a wide range of construction services, which allows them to offer full package of construction services to their clients, which KLCI 1,642.21 makes them more competitive among their peers. Furthermore, it does not carry YTD KLCI chg -3.0% other business risks i.e. property or plantation as compared to other big-cap YTD stock price chg 12.9% contractors. Riding on infrastructure boom. As SUNCON possesses excellent track records in three major urban public transport projects, namely LRT, MRT and Stock Information BRT, we are confident that SUNCON will continue to benefit from infrastructure Bloomberg Ticker No projects under 11MP. For 2016, we expect SUNCON to bag LRT3 and stand a Market Cap (RM m) SCGB MK Equity high chance in the Pan Borneo highway after securing RM1.2b in MRT2 project Issued shares 2,042.8 earlier this year.