This article first appeared in The Edge Malaysia Weekly on July 3, 2023 - July 9, 2023

THE construction sector was badly affected in the past few years by the slow roll-out of projects, escalating building material prices, labour shortages and impact from the Covid-19 pandemic.

The effects continue to linger and with the road ahead expected to be bumpy, Sunway Construction Group Bhd (SunCon) has decided to focus on new sectors and regional expansion, rather than rely on government projects.

Group managing director and executive director Liew Kok Wing says SunCon is constantly evolving its business strategies in tandem with the dynamic operating environment. This time, it is venturing into non-conventional and higher-value-added, technology-related projects.

“We are looking at charting a new growth path by expanding our order book beyond traditional construction projects and local mega infrastructure opportunities, by focusing on data centres, semiconductor factories and warehouses,” he tells The Edge in an interview.

Liew observes that Malaysia is witnessing a surge in new and emerging data centre investments, with projects having the capacity of more than 800mw scheduled for development over the next five years.

“SunCon has already secured a data centre construction project in Sedenak Tech Park (STeP) in Johor, allowing us to gain valuable experience and positioning us to capitalise on emerging opportunities in this sector,” he elaborates.

As at March 31, SunCon had an outstanding order book of RM6.03 billion, of which RM1.656 billion was for the general contractor services contract for the data centre project in STeP.

While construction commenced last year and is slated for completion by the third quarter of next year, the contract is anticipated to contribute positively to SunCon’s earnings from the financial year ending Dec 31, 2023 (FY2023). Moreover, its total outstanding order book will provide earnings visibility for the next two to three years.

“We have been actively tendering for projects that include a mix of external and in-house projects. We target a minimum order book replenishment of between RM2 billion and RM3 billion annually,” says Liew.

SunCon is 54.56%-owned by Sunway Bhd, the listed conglomerate controlled by Tan Sri Dr Jeffrey Cheah Fook Ling. The prominent tycoon also has a 10.69% stake in SunCon, held directly and via his investment vehicle Sungei Way Corp Sdn Bhd.

According to SunCon’s 2022 annual report, its major shareholders as at March 31 also included the Employees Provident Fund (9.66%), Amanah Saham Bumiputera (6.8%) and Great Eastern Life Assurance (M) Bhd (3.1%).

For perspective, 37% of SunCon’s current order book comprises in-house projects from Sunway Group. Among its ongoing projects is a mixed-use development at South Quay Square, which is expected to be completed in 2025.

Liew says SunCon will continue to support Sunway Group’s expansion plans and there are further projects in the pipeline, including mixed-use developments in Ipoh and Penang to be rolled out progressively. Sunway Group’s land bank stands at 3,292 acres with a gross development value (GDV) of more than RM59 billion.

“These developments play right into the division’s strength of constructing hotels, medical centres, residential and mixed-use commercial developments and will help drive growth across SunCon,” he adds.

Liew reveals that SunCon is actively seeking collaborations with new and existing joint-venture (JV) partners to explore other niche segments, including special purpose facilities such as semiconductor factories and warehouses.

“With the global surge in demand for electronics manufacturing services (EMS) and semiconductors, we see great potential in Southeast Asian markets. SunCon is eager to expand its order book in these sectors through strategic collaborations,” he says.

Notably, Malaysia secured RM264.6 billion worth of approved investments in 2022, comprising 4,454 projects that are expected to create 140,370 new job opportunities for Malaysians, according to the Malaysian Investment Development Authority (Mida).

Liew points out that a big chunk of foreign direct investments (FDIs) come from the manufacturing industry.

“A huge amount of FDI is coming into Malaysia, especially in the areas of data centres and semiconductor factories. Their projects are not small. We are talking about at least RM1 billion each. There are plenty of potential growth opportunities for us to grab,” he remarks.

The 54-year-old Liew has over 20 years of experience in the construction industry, including as deputy managing director of Sunway Construction Sdn Bhd (SCSB) — a wholly-owned subsidiary of the group — a position he has held since 2016.

In January 2020, he was promoted to managing director of SCSB. Additionally, he was appointed to the board of SunCon and served as the alternate director to former SunCon MD Chung Soo Kiong.

Liew, who eventually took the baton from Chung on April 1 last year, acknowledges that if SunCon had kept waiting for government projects, the group “would have been in deep trouble by now”.

“We are tendering for a few warehouse projects. Similarly, we are submitting a tender for a big job to build a semiconductor factory. Hopefully, we can announce some good news soon. As always, it depends on how competitive we are,” he says.

Liew says that SunCon had previously tendered for a job to build a factory in Melaka for a US-based semiconductor giant, but the group lost the bid. 

However, it is worth noting that the chipmaker also intends to invest roughly RM9 billion to set up new facilities in Kuala Lumpur. 

Liew reiterates that SunCon cannot rely on government projects anymore, given that the only major public sector job that is still moving is the Johor Baru-Singapore Rapid Transit System (RTS), for which the group secured Package 1B and Package 5 worth RM605 million in March.

As an international link between Malaysia and Singapore, the RTS Link project includes the building of a new immigration, customs and quarantine (ICQ) facility next to the station in Bukit Chagar. Liew says SunCon is keen to participate in the ICQ project, the tender for which closes in mid-July.

SunCon’s share price had declined six sen, or 3.7% year to date, to close at RM1.53 last Wednesday, giving the company a market capitalisation of RM1.98 billion. The stock is currently trading at a historical price-earnings ratio (PER) of 15 times.

For comparison, IJM Corp Bhd is trading at a PER of 33 times, Malaysian Resources Corp Bhd (MRCB) at 23 times and Gamuda Bhd and WCT Holdings Bhd at six times.

SunCon’s net profit grew 20% to RM135.18 million in FY2022, up from RM112.58 million a year earlier, while its revenue increased 25% to RM2.155 billion from RM1.729 billion in FY2021. Its financial performance was attributed to the full resumption of economic activities in the country, compared with FY2021 when productivity was affected by several Covid-19 lockdowns.

Liew says SunCon has submitted bids for two of the packages of the long-awaited Mass Rapid Transit 3 (MRT3) project and the group is looking forward to a positive outcome. “As everything is uncertain and fluid at this juncture, we will not share in detail. But an announcement will be made in due course if required.”

He observes that SunCon is the only contractor that has experience constructing all three forms of urban rail transit projects in Malaysia, including the MRT 1 and 2, the Light Rail Transit (LRT) 2 and 3, as well as Bus Rapid Transit (BRT). “Based on our strong track record, coupled with our solid financial standing, we are well positioned to participate in the nation’s economic development plan,” he adds.

As for the Kuala Lumpur-Singapore high-speed rail (HSR) project, Transport Minister Anthony Loke stated in March that the government was open to proposals from private entities that possess the necessary technical and financial capabilities to revive the project. Furthermore, the government was willing to consider new funding and implementation mechanisms.

“Locally, SunCon is keen to pursue mega infrastructure projects such as MRT3, Bayan Lepas LRT and HSR. But for now, we will concentrate our efforts on mega projects that are already in the pipeline,” says Liew.

Given that SunCon participated in the LRT, MRT, BRT and RTS projects, he believes that the HSR project could be another feather in its cap.

“The HSR project will be a huge economic stimulus and it will be much bigger than MRT3. But we have no idea when this project will go ahead. My personal hope is that I can actually get SunCon involved in the HSR project before I retire,” Liew says half-jokingly. 

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