Sunway Construction: Riding the Data Centre Wave to New Heights

Sunway Construction Group Bhd (SunCon) is firing on all cylinders. The contractor has just secured a RM1.02 billion mechanical, electrical and plumbing (MEP) fit-out contract for a data centre in Johor from a US-based multinational technology company, lifting its year-to-date job wins to RM5.8 billion and expanding its outstanding order book to a record RM10.4 billion. This is not just another contract win; it is a statement of intent. SunCon is no longer merely a construction player; it is the go-to partner for the world's largest technology companies building the digital infrastructure of tomorrow.

The Data Centre Wave: A Tidal Force

Malaysia's data centre ecosystem is expanding at breakneck speed, and SunCon is riding the crest of that wave. The latest RM1.02 billion award is the group's largest standalone MEP contract to date, coming in well above MBSB Research's earlier estimate of RM600 million to RM700 million. The client's decision to fit out the building's full megawatt capacity, rather than a partial fit-out initially envisaged, underscores the scale and urgency of hyperscale expansion in the region .

The numbers tell a compelling story. SunCon's active tender book now stands at approximately RM14.3 billion across both data centre and non-data centre projects, with around 90% of the group's RM13.5 billion tender book as at July comprising data centre projects split roughly equally between Johor and the Klang Valley . The group is currently participating in tenders for projects from five data centre clients, comprising three existing customers and two new ones . TA Research has already raised its FY26 job replenishment assumption for SunCon to RM7 billion from RM6.5 billion .

Strategic Sequencing: From Core-and-Shell to MEP

What makes this latest win particularly significant is the strategic sequencing behind it. SunCon had previously secured the RM570 million core-and-shell construction package for the same data centre project in December last year, which included an option for the MEP works to be awarded to the group . This "land and expand" strategy is now bearing fruit, with MBSB Research expecting the latest award to pave the way for more follow-on jobs as SunCon continues executing its strategy of securing MEP packages after completing core-and-shell works for existing hyperscale customers .

TA Research observed that the contract value exceeded its earlier estimate of around RM900 million, reflecting higher construction costs amid rising building material and M&E equipment prices, coupled with the increasing complexity of hyperscale data centres requiring more advanced electrical, cooling and backup power systems . Given the specialised nature of MEP works, Kenanga Research expects the project to deliver profit-before-tax margins at the higher end of SunCon's typical 5% to 8% margin range.

Beyond Data Centres: A Diversified Growth Engine

While data centres are the headline-grabber, SunCon's growth story is more nuanced. The group continues to benefit from recurring in-house contracts from its parent, Sunway Group, providing a steady base of work . UOB Kay Hian Research expects SunCon to replenish about RM1 billion of its order book from parent Sunway Bhd in 2026, mainly from potential internal projects including Sunway Medical's hospital expansion, Sunway's planned property launches worth RM2 billion to RM3 billion annually, and renovation works at its existing hotels and malls.

Beyond the Sunway ecosystem, there are additional upside catalysts from major infrastructure projects such as Johor's Elevated Autonomous Rapid Transit and the Penang Light Rail Transit . Potential wins in 2H26 could include approximately RM1 billion worth of internal hospital and transit-oriented development projects.

Analyst Scorecard: A Spectrum of Optimism

The research community is overwhelmingly positive on SunCon, though the degree of enthusiasm varies. MBSB Research is the most bullish, maintaining a "buy" recommendation with a target price of RM8.81 after raising earnings estimates, citing "strong fundamentals, a resilient balance sheet, and promising growth prospects in the construction sector" . Kenanga Research reiterated its "outperform" call with an unchanged target price of RM8.40 , while TA Research maintained its "hold" recommendation but raised its target price to RM8.26 from RM7.99 .

UOB Kay Hian Research adds another dimension to the investment case, noting that SunCon is in a net cash position of about RM1.2 billion, reflecting an improving trend over the last two years . The brokerage expects a dividend payout ratio of 100% to 143% between 2026 and 2028, implying an attractive prospective yield of 4.8% to 6.5%, and does not rule out further special dividends.

The Cautionary Note

However, a foreign brokerage analyst offers a more measured perspective, noting that much of the market's enthusiasm is already reflected in the share price after its strong run, leaving less room for valuation expansion . Kenanga Research also cautions that risks to the outlook include weaker-than-expected construction job flows, project cost overruns, potential liquidated ascertained damages, and rising building material costs .

SunCon's trajectory is clear: a record order book providing earnings visibility over the next two to three years , a diversified pipeline spanning data centres, infrastructure, and internal projects, and a net cash position that provides optionality for capital management. The group's established expertise across building, infrastructure, solar and MEP engineering works positions it uniquely to capture the structural growth in Malaysia's digital infrastructure buildout .

As Malaysia positions itself as a regional data centre hub, SunCon stands ready to build the physical infrastructure that will power the digital economy. The RM1.02 billion MEP contract is not the destination; it is the latest milestone on a journey that is far from over.