RHB maintains ‘buy’ on IJM on signs of improvement


  • Corporate News
  • Friday, 14 Feb 2020

RHB Research maintained its “buy” call on the stock but marginally slashed core net earnings for the group by 1-4% for FY20F-22F and revised its target price by 3.6% to RM2.74 after factoring in IJM Plantations’ revised target price

KUALA LUMPUR: There could be improving sentiment on IJM Corp Bhd as the group displays early signs of improvement, according to RHB Research.”

“Opportunities in 2020 appear wide for new public jobs from rationalised projects - ECRL, Johor-Singapore RTS and Bayan Lepas LRT - thereby boosting earnings should these projects proceed within their expected timeframes, ” it said.

According to RHB, the section B civil jobs appears to be the closest to be cleared for award while IJM has a geographical advantage in Pahang given its exposure through Kuantan Port, where a station will be located.

“Taking these into account, the accretive value derived from East Coast Rail Link (ECRL) could be far-reaching for the conglomerate, ” it said.

However, RHB said bidding rounds could be competitive and pressure margins in the construction wing.

Meanwhile, IJM port is on track to achieve about 30% year-on-year growth in freight weight tonnes throughput volume after adding to the 13 million freight weight tonnes throughput achieved in 1HFY20.

“Positively, growth volume should come ahead of our expectations of 15% year-on-year (y-o-y) in FY20F. For FY21-22F, growth assumptions built in our model range between 10% y-o-y and 15% y-o-y, ” said RHB

In the property arm, lumpy earnings are expected in the January-March quarter with RM700mil expected to be recognised from the Royal Mint Gardens.

The plantation segment is also likely to reverse its losses in 1HFY20 after stripping out possible losses from derivative contracts, which RHB expects in 3QFY20.For FY20, IJM’s management recently guided for 8-10% FFB growth.

The research house maintained its “buy” call on the stock but marginally slashed core net earnings for the group by 1-4% for FY20F-22F and revised its target price by 3.6% to RM2.74 after factoring in IJM Plantations’ revised target price.

This was coupled with a revision in net margin by minus 1.5 ppts in the construction segment to reflect the expectation of the competitive tender process for future construction projects.

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IJM , plantation , property , construction , buy , LRT , ECRL ,

   

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