Sunway Holdings Bhd is an undervalued construction company, taking into account its earnings per share growth in excess of 25 per cent annually over the next two years, according to ECM Libra Investment Research.

The stock is deeply undervalued at a current valuation of just 7.2 times forward P/E (price/earning), it said.

ECM Libra has forecast the company's adjusted net profit for financial year ended December 31, 2009 at RM99.5 million and in 2010 at RM118 million while for 2011, it is RM153.1 million.

The research house said for 2010, it had already factored in a RM1.5 billion order book replenishment for the company's 2010 earnings forecast.

"We maintain our earnings estimate and target price (for Sunway at RM1.94) as we already factored in the RM1.5 billion order book replenishment into our 2010 earnings model," it added.

The replenishment level expectation is reasonable as Sunway is targeting tenders of RM16.1 billion in 2010 and has a historical success rate of between 10 and 15 per cent, the research house explained.

"We continue to like Sunway Holdings for its strong earnings recovery in 2010, driven by its construction and property divisions," it said in a research note today.

Among some of the jobs being pursued by the company are, the Low Cost Carrier Terminal (LCCT), the remaining phases of the Pahang-Selangor raw water transfer project and subsequent phases of Arzanah development in Abu Dhabi.

Furthermore, its historical annual order book replenishment has averaged at about RM1.6 billion over the last three financial years.

This ECM said, adds further credence to Sunway Holdings’ ability to replenish its remaining order book of about RM3 billion.

Sunway Holdings announced last Friday that it had accepted a letter of award for a contract worth RM21.5 million from Sunway City, for the construction of 100 units of two-storey cluster homes and a unit of TNB sub-station (Phase 2B) in Sunway Alam Suria, Shah Alam. -- Bernama