KUALA LUMPUR: CIMB Equities Research expects stronger quarters ahead for IJM Corp Bhd
after the annualised 1Q18 core earnings made up 76%-78% of its and consensus full-year forecasts.
It said on Thursday the star performer was the port division’s strong 73% growth in throughput.
However, plantations earnings fell 32% due to higher cost despite strong revenue.
“Outstanding order book of RM8.7bil has upside; rail theme could emerge. Construction wins as key potential catalysts; Add retained with unchanged target price of RM3.87,” it said.
Commenting on the results, CIMB Research viewed them to be in line with expectations as IJM’s construction billings tend to pick up in the latter part of the year.
Group core net profit in 1Q18 rose by 12% on-year to RM131.3mil, thanks to its infra segment (ports and highways). This was partially offset by the weakness in plantation and industries, dragged by higher raw materials prices and maintenance costs.
IJM’s infrastructure segment overtook construction to become the group’s largest pre-tax profit contributor in 1Q18, at 37% of the overall pie.
On a on-year basis, pre-tax profit surged by 211% from RM20.8m to RM64.6m. This was made possible by a 73% on-year surge in IJM’s cargo throughput to 5.114 million freight weight tonnage (FWT) in the quarter, and stronger contribution from the segment’s associates.
“This is a positive surprise, given that the bauxite moratorium in Pahang is still in place,” it said.
CIMB Research said IJM group lantation segment’s pre-tax profit in 1Q18 fell by 36% on-year to RM24.8m, despite a 32% on-year rise in revenue.
This was due to production cost pressures from more young mature areas using up full fixed maintenance and overhead costs set against start-up crop yields.
“Despite the benefits of higher CPO prices, we suspect that this could continue to weigh on plantation earnings in subsequent quarters,” it said.
Year-to-date, IJM secured two construction jobs, collectively valued at RM1.6bn. This is inching closer to the research house’s RM2bn new win assumption, and halfway past its RM3bn order book replenishment target.
To recap, IJM won a RM1.2bn contract in Feb for the shopping mall at the Bukit Bintang City Centre (BBCC) development. In July, it won a RM451m job to build UOB Tower 2.
“We believe IJM could emerge as a likely beneficiary of one of the packages for the RM55bn East Coast Rail Link (ECRL) project, due to its track record in rail construction and strong presence in the East Coast Economic Region (ECER) corridor.
“This could lead to potential upside to its current outstanding order book of RM8.7bn. We believe IJM is one of the earlier beneficiaries of the rail theme in 2017/18,” it said.
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