Quick take: IJM falls 5.3% on contract termination

  • Business
  • Wednesday, 10 Jul 2019

KUALA LUMPUR: Shares of IJM Corp Bhd fell in early trade Wednesday after its RM1.12bil light rail transit line 3 (LRT 3) contract was terminated.

The counter, one of the most active counters, rose 5.35%, or 13 sen to RM2.30 with over 8.06 million shares traded. 

IJM Corp said its RM1.12bil contract for underground works on the LRT 3 project has been terminated. 

The company said its wholly owned subsidiary, IJM Construction Sdn Bhd (IJMC), had received the notice of termination from MRCB George Kent Sdn Bhd on July 8. 

IJMC had been awarded the contract on March 13, 2018. Preliminary work had commenced before the project was suspended in June 2018. 

Apart from the potential earnings from the project, IJM said the termination of the project would not have any significant effect on the financial position of the group. 

AmInvestment Bank Research has We cut its our FY20–22 net profit forecasts by about 2% each, but raise its fair value by 5% to RM1.22 (from RM1.16). 

“We change our valuation method to ‘sum of parts’ (SOP) (from straight P/E) to reflect a better chance for IJM to realise fair valuations for its toll roads (taking the cue from the government’s seemingly fair takeover proposals for Gamuda’s toll roads recently). 

“Our valuation basis for IJM’s construction business (within the SOP valuation) remains unchanged at 10x forward earnings, in line with our benchmark forward target P/E of 10x for large-cap construction stocks. Maintain underweight,” AmInvestment said. 

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