Broker: UOB Kay Hian
Date of Report: Friday, 22 August 2025

Sunway Construction Group Delivers Record Earnings: What Investors Need to Know About Malaysia’s Construction Powerhouse in 2025

Overview: Sunway Construction Group’s Stellar 2Q25 Results and Market Position

Sunway Construction Group Berhad (SCGB), a leading name in Malaysia’s construction sector, has surpassed earnings expectations for the second quarter of 2025. Bolstered by accelerated progress billing and high-margin data centre (DC) projects, the group’s robust financial performance reflects its strategic positioning in a rapidly evolving industry. Despite the impressive results, the current share price is seen as fairly valued, with capital returns for investors remaining modest after a strong year-to-date rally.

Company Snapshot: Key Metrics and Shareholder Profile

Share Price: RM5.85
Target Price: RM6.27 (Upside: +7.2%)
Market Cap: RM7,675.4 million (USD 1,816.4 million)
Shares Issued: 1,312 million
52-week High/Low: RM6.27 / RM3.26
Major Shareholders:
Sunway Holdings Sdn Bhd (53.6%)
Sungei Way Corp Sdn Bhd (9.9%)
Employees Provident Fund Board (4.3%)
Sector: Industrials

2Q25 Earnings: Surpassing Expectations

The group posted a core net profit of RM94.1 million for 2Q25, up 14% quarter-on-quarter and 153% year-on-year, with revenue soaring to RM1.48 billion. The strong showing was supported by improved construction progress and higher-margin data centre projects. Net cash improved to RM1.24 billion, translating to higher interest income and reduced financial costs.

Dividend Outlook: Attractive Interim Payout

Declared a second interim dividend of 7.25 sen for 2Q25 (vs. 3.5 sen for 2Q24)
1H25 dividend totals 12.5 sen, reflecting a 91% payout ratio and a 2.1% yield

Financial Performance and Forecasts: Growth Trajectory Through 2027

Suncon’s upward revision of earnings forecasts—by 10-12% for 2025-2027—reflects confidence in higher margins and progress billings from ongoing projects. Here are the key financial projections:

Orderbook and Segmental Outlook: Strong Pipeline Secures Multi-Year Growth

Sunway Construction boasts a record-high outstanding orderbook of RM6.7 billion as of end-2Q25, underpinned by:

• Two major DC packages from a US client in Klang Valley (ECI packages)
• RM1.5 billion Rapid Transit System Transport Oriented Development (RTS TOD) at Bukit Chagar
• RM393 million data centre contract for K2 Strategic Infrastructure

The tenderbook stands at a robust RM14.8 billion, with DC-related projects contributing 75–80%. DC works currently comprise 45% of the existing orderbook.

Segmental Performance: Data Centre Projects Power Construction Growth

Construction Division:
Operating profit (EBIT) surged to RM115 million (+6% qoq, +147% yoy)
Revenue climbed to RM1.43 billion (+5% qoq, +140% yoy)
Accelerated progress on DC projects (Sedenak DC at 80% completion)
EBIT margin expansion (by 0.1ppt qoq) due to lucrative DC works
Precast Concrete Division:
Revenue and profit declined due to a high base in 2Q24 and slower replenishment
EBIT margin at -1.3% in 2Q25

Risk Factors: Input Costs and Regulatory Developments

MACC Investigation:
No corporate liability for Suncon; probe limited to an individual project manager
Input Cost Pressures:
Higher sales & service tax (6% to 8%), diesel subsidy rationalisation, minimum wage hike (to RM1,700), and 2% EPF contribution for foreign workers
Estimated negative earnings impact: 3–5%; company expects to pass on costs for new projects

Valuation: Target Price Raised, HOLD Recommendation Maintained

Sunway Construction’s target price is revised upwards to RM6.27 (from RM5.55), implying a 2026F PE of 22x (+1 SD above five-year mean). The record-high orderbook and strong tender prospects anchor multi-year growth, justifying this valuation. However, after a 26% share price rally year-to-date, the HOLD rating is maintained, reflecting modest capital return prospects in the near term.

Environmental, Social, and Governance (ESG) Highlights

Environmental:
Initiatives to mitigate emissions, manage biodiversity impact, waste disposal, and pollution
Social:
Engagement with local authorities and communities to ensure project success
Governance:
Strong board independence (four out of seven directors are independent)

Conclusion: Sunway Construction—Well-Positioned for Continued Leadership

Sunway Construction Group’s outperformance in 2Q25 and its bulging orderbook underscore its leadership in Malaysia’s construction sector. With data centre projects driving higher margins and earnings visibility, the company is set for multi-year growth. While input cost headwinds are manageable and regulatory risks have eased, current valuations suggest that share price upside is limited for now. Investors should watch for further orderbook wins and margin trends as key catalysts for future outperformance.

Key Financial Ratios and Metrics At-a-Glance

Stay tuned for further updates as Sunway Construction continues to shape Malaysia’s construction landscape with its unwavering growth momentum and strategic focus on high-value projects.