Analysts positive on IJM’s latest contract wins

KUALA LUMPUR: IJM Corp Bhd rose 2.6% this morning as analysts gave positive reviews on the stock after the company secured RM 981.8 mil construction contracts from the Works Ministry.

The construction group rose 2.58%, or four sen to RM1.59.

The first contract worth RM831mil is a design-and-build turnkey construction contract for a new 312-bedded government hospital in Kapar.

Another contract worth RM150.8mil is for the construction of an Inland Revenue Board (IRB) office tower in Shah Alam.

Following the project win, the outstanding order book of IJM’s construction division remains healthy at RM4.6bil.

“We remain sanguine on the group’s earnings momentum moving forward and we reiterate that IJM remains one of our top buy picks for the construction sector,” MIDF Research said.

The research house said with a net cash position estimated at about RM327mil, IJM’s balance sheet remained strong to take on mega infrastructure projects that may require PFIs or PPPs.

“We also expect IJM to be among the front runners for packages CMC301 or CMC302 of the upcoming MRT3, which could come up to RM2.79bil and RM13.94bil respectively, given its vast experience in rail projects. Results are expected to be announced by the end of 2022, likely after the 15th General Election (GE15),” MIDF said.

It has maintained its buy call on IJM with an unchanged target price of RM2.18.

Hong Leong Investment Bank said the development was in-line with expectations falling within its replenishment assumption of RM3bil for FY23.

“Both projects are well within IJM’s area of core expertise and we do not expect execution hiccups. No change to our forecasts.

“Maintain buy rating with an unchanged target price of RM1.96. Trading at 0.56x P/B (-2SD 10-year range) the stock offers inexpensive exposure to mega projects. Our base case assumes no significant changes in policies post-GE,” it said.

The research house added that the key catalysts include MRT3 news flow and contract wins while risks include a significant change in policies post-GE, prolonged elevated materials prices and labour shortage.