Analysts Warn Suncon S Data Centre Tender Risks Loom Amid Graft Investigation But Core Fundamentals Remain Strong

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KUALA LUMPUR (July 22) – Sunway Construction Group Berhad (KL: SUNCON) is facing potential short-term disruptions in its tendering activities, particularly within the RM14 billion data centre sector, due to an anti-corruption inquiry concerning the interactions of one its employees with subcontractors. Importantly, analysts emphasize that the company itself is not the focus of this investigation.
Sunway Construction has asserted that this situation stems from an isolated incident, with no involvement from senior management. Nevertheless, analysts at CGS International believe there may be reputational risks that could momentarily benefit competitors such as Gamuda Berhad (KL: GAMUDA) and IJM Corporation Berhad (KL: IJM).
“There could be implications for some of SunCon’s existing tenders, especially in the data centre domain, where we understand the company is competing for seven to eight projects totaling RM14 billion,” the analysts noted.
Despite these challenges, the research firm remains optimistic about Sunway Construction’s ability to rebound in the future. “Given its robust brand reputation and strong parent company support, we believe SunCon can navigate this incident without significantly affecting its new order acquisitions in the long run,” CGS International stated in a report released on Tuesday.
As of June, Sunway Construction’s year-to-date (YTD) victories for FY2025 have reached RM3.5 billion, with an order book amounting to RM7.9 billion, where data centres represent 49% of this total.
CGS International added that the company’s target for new order wins in FY2025, ranging from RM4.5 billion to RM6 billion, remains intact, though they do not anticipate unexpected increases that would trigger a significant revaluation.
In a separate analysis, Phillip Capital expressed concerns that the group’s success rate in securing new tenders, particularly in the data centre segment, may also be indirectly influenced as overseas multinational clients increasingly emphasize environmental, social, and governance standards, as well as compliance.
Emerging strategies show that Sunway Construction is aiming for four to five major data centre projects, which constitute 90% of its RM15 billion tender portfolio. Despite the challenges, the company appears positioned to achieve its internal targets and replenish its order book—projecting RM5 billion even with just one major data centre project secured in the second half of FY2025.
Following recent developments, Phillip Capital upgraded its rating for the company to “hold” from “sell,” maintaining a target price of RM5.35. After an 8% drop in share value linked to the investigation news, they believe the current valuation is justified considering the company’s strong projected earnings growth of 75% year-on-year.
CGS International has retained its “hold” stance and a target price of RM5.50, pointing to a less appealing valuation of 22 times the FY2026 forecasted price-earnings ratio compared to the sector average of 14 times. Additionally, they foresee potential short-term pressure on share prices due to the ongoing inquiry by the Malaysian Anti-Corruption Commission.
“Investors had been placing a premium on the company’s return on equity (ROE) due to its data centre exposure. However, without securing more data centre contracts, we do not foresee significant earnings growth beyond FY2025,” CGS stated.
The research firm has also cautiously adjusted its earnings per share forecasts for FY2025 to FY2027, in light of anticipated lower new project wins and the impact of share issuance under the employee share scheme.
As of 10:30 am on Tuesday, shares for Sunway Construction were trading at RM5.34, marking a decline of 15 sen, with a market capitalization of RM7.08 billion.
For more information, please read:
Sunway Construction confirms employee under investigation by anti-corruption agency


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