by LYDIA NATHAN / Graphic by MZUKRI
SUNWAY Construction Group Bhd’s (SunCon) projects in India are expected to stay resilient due to the locations, despite the severity of the Covid-19 infections in the country.
AmInvestment Bank Bhd (AmInvest) analyst Joshua Ng stated concerns over the progress of the projects and the safety of its staff in India have been laid to rest following engagement with the company.
SunCon secured two highway projects in Tamil Nadu, India last year with a combined value of RM823 million on a hybrid annuity model.
The projects include the Thorapalli Agraharam-Jittandahalli section of NH-844 worth RM508 million and the Meensurutti-Chidambaram section of NH-227 worth RM315 million, and make up 16% of SunCon’s outstanding construction orderbook of RM5.2 billion.
Both the projects are in the sparsely populated outskirts of the Tamil Nadu, which are not considered one of the epicentres of India’s massive second Covid-19 infection wave, with only 16,233 confirmed cases per one million population.
This is compared to 47,396 cases in Kerala and 39,057 in Maharashtra on the west coast, and 61,218 in Delhi.
SunCon only has a handful of staff members both Malaysians and Indian nationals situated there, who work remotely from Hyderabad in the Telangana state, with relatively low confirmed Covid-19 cases, Ng stated.
AmInvest remains cautious on the outlook of the Malaysian construction sector despite news the Mass Rapid Transit Line 3 (MRT3) project could potentially commence in the second half of 2021.
The research firm expects SunCon to weather a downturn better given its ability to compete under an open bidding system, coupled with the availability of building jobs from its parent and sister companies under the Sunway Group.
SunCon’s current valuation is fair at 13 to 17 times forward earnings on muted sector prospects leading AmInvest to maintain its forecast and fair value of RM1.80 on SunCon with a ‘Hold’ call.
SunCon’s shares have been on a steady decline for over two weeks, falling from RM1.84 on April 20 to RM1.69 at close yesterday, valuing the company at RM2.17 billion.