KUALA LUMPUR: CIMB Equities Research is retaining its target price of RM3.87 for IJM Corporation, which is nearly 27% above its last traded price of RM3.05 after the company secured a RM1.5bil highway job in India.
“Add maintained, with rail domestic contract wins as potential catalysts. Potential new domestic contracts in the pipeline could emerge from the RM55bil East Coast Rail Line (ECRL), estimated RM40bil MRT 3 (Circle Line), and the RM50bil to RM60bil KL-Singapore High Speed Rail’s (HSR) Malaysia civil works scope,” it said on Thursday.
On Wednesday, IJM Corp announced it had secured a contract from the National Highway Authority of India for the 109.1km highway project.
The highway authority will also provide a grant of RM235.9mil. Excluding the grant, the cost/km should work out to RM13.7mil.
The project consists of widening the existing two-lane carriageway of the SolapurBijapur section of India’s National Highway. IJM will turn the portion of the highway to a four-lane standard replete with new flexible pavement, road intersections, railway overhead bridge, and toll plazas.
The tollway will serve as an alternative route to the North-South Corridor of the NHDP, connecting southern India with northern India.
Currently, IJM operates two tolled highways in India: i) the 246.8km-Rewa Tollway, and ii) 68.5km Chilkaluripet-Vijayawada Tollway. It also owns 30% of SwarnaTollway.
Since March, IJM has been involved in a RM193.8mil project to widen and upgrade 19.8 km of the Dewas Bypass bypass road in Madhya Pradesh.
“The new order book from Solapur-Bijapur highway is the single-largest contract for IJM year-to-date and, arguably, its largest overseas highway contract.
“Based on our estimates, this contract would increase IJM’s outstanding order book by 17% to RM10.2bil,” it said.
The order book level is among the largest in the construction space. With this new Indian tollway contract, total YTD contract wins have exceeded CIMB Research’s forecast of RM2bil for FY18F.
“Apart from the construction order book, IJM will also benefit from the recurring income of the highway once it commences toll charges,” it said.
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