KUALA LUMPUR: Sunway Construction Bhd is a rare highlight in the sector as its potential new awards will serve as a positive catalyst in the second half of the year.

       According to RHB Research, the outcome of the group's tenders are expected to be revealed later this year, a signalled by its management's confidence about hitting the RM2bil target.

       So far, Sunway Construction has secured RM462mil in new contracts.

       "Very few local contractors enjoy this positive outlook, as they are burdened by COVID-19 restrictions. We believe SCGB’s current valuation – at a 13% discount to its 5-year mean – is attractive," said RHB.

       For 2Q21, the research house expects Sunway Construction to report a weaker quarter-on-quarter performance due to the group's operations being only allowed to run its operations at 60% of maximum capacity.

       "On that note, we believe it will likely report a 2Q21F net profit of MYR22-25m, implying a 26% decline QoQ, but >100% YoY growth," it said, while adding that the slowdown is expected to extend into 3Q21.

       RHB, which has a "buy" call on Sunway Construction, cut its target price to RM1.81 from RM1.94 after lowering its FY21-23 earnings forecast.

       The research house's base case scenario suggests a full reopening of the construction sector could happen as early as 4Q21.

       "Consequently, an early recovery would be likely during the period, allowing SCGB to meaningfully ramp up productivity from a low base.

       "However, this should only come after two quarters of sluggish activities, as a result of Phase 1 of the NRP restrictions that have been extended until today (in Kuala Lumpur and Selangor)," it said.