AmInvestment upbeat on IJM Corp, keeps Buy call

KUALA LUMPUR: AmInvestment Research is upbeat on the outlook for IJM Corporation which has a record construction order book of RM8.6bil.

It said on Friday the order book comprises buildings contracts (34%), roads (36%) and non-road infrastructure (30%). 

“It (IJM) guided for construction job wins of RM3bil in FY18F, consistent with its job wins of RM3bil in FY17 (we therefore raise our assumption for job wins in FY18-20F to RM3bil annually, from RM2bil). 

“The new jobs in FY18F are likely to come from buildings (it expects the award of some building jobs ‘over the next one to two months’) and infrastructure (we believe, including at least a work package from LRT3). It appeared confident that property sales in FY18F would match the RM1.4bil achieved in FY17,” it said. 

AmInvestment Research fine-tuned its FY17-19F forecasts by 2%-4%, raise its sum-of-parts based fair value by 2% to RM3.76 (from RM3.70) and maintained its Buy call. 

It pointed out IJM’s FY17 core net profit of RM505.1mil (excluding RM148.7mil one-off gains but including RM100mil gains from a land sale) missed our forecast and consensus estimates by 7% and 17% respectively. 

The key variance against the research house’s forecast came from lower-than-expected property development profits due to its conscious decision to focus on low-margin affordable homes, coupled with increased incentives to entice buyers amidst a soft property market. 

“FY17 core net profit eased 1% on-year. Higher profits from construction and plantation were offset by lower infrastructure profits,” said the research house.