Rollout of infrastructure projects to benefit IJM

MIDF Research said the group has an outstanding order book of RM4.9bil, with earnings visibility over the next few years.

PETALING JAYA: Analysts are optimistic about the outlook for IJM Corp Bhd with expectations of heavier construction job flows and stronger quarters ahead, driven by the rollout of public infrastructure projects.

According to MIDF Research, IJM Corp’s core net profit for the first quarter ended June 30, for the financial year 2024 (1Q24), has more than doubled to RM66.9mil.

This was due to strong earnings from its property development, manufacturing, quarrying and infrastructure business segments.

The research house said, in its note yesterday, that although IJM Corp has seen pre-tax profit for its construction division slip during the quarter, the group has an outstanding order book of RM4.9bil, with earnings visibility over the next few years.

In addition, the research house said the group has already made inroads into Kalimantan with IJM Corp having submitted a proposal to the Indonesian government for the construction of government housing in Indonesia’s new capital Nusantara.

“The contract is worth more than RM1bil, which would mark IJM Corp’s first job in Nusantara and could pave the way for more,” said MIDF Research.

Hong Leong Investment Bank (HLIB) Research noted that IJM Corp is also in contention for the Mass Rapid Transit 3 (MRT3) and the East Coast Rail Link (ECRL) projects, on top of other domestic highway extension jobs and hospital and highway opportunities in Sarawak.

The research house said the latest developments surrounding the Penang Light Rail Transit project, estimated to cost between RM10bil and RM15bil, could also give the construction conglomerate a lift given the group’s foothold in Penang.

On the performance of IJM Corp’s property segment for the quarter, HLIB Research said: “Sales came in weak at RM260mil, representing reductions of 13.3% and 35%, quarterly and yearly, respectively, but are guided to improve in the coming quarters.

“The sales target for the year ending March 31, 2024, remains unchanged at RM2bil, to be backed by planned launches of RM2.9bil in FY24.”

The research house noted that unbilled sales at the end of the quarter under review stood healthy at RM2.5bil, declining by 16.7% sequentially on the back of slower sales during the period.

Despite IJM Corp’s 1Q24 core net profit coming in at only 20% of its full-year estimates, Kenanga Investment Bank Research is unperturbed as it expects strong quarters ahead while the group’s construction segment improves.

The research house expects a significant revitalisation of the construction sector in the latter half of 2023, backed by the roll-out of the RM45bil MRT3 project and six flood mitigation projects, reportedly worth RM13bil, coupled with an accelerated disbursement of the RM97bil gross development expenditure in Budget 2023.

“The private sector construction market is vibrant, underpinned by massive investment in new semiconductor foundries and data centres.

“We understand that IJM Corp is also eyeing work packages from the ECRL and various projects in Sabah, Sarawak and Indonesia.

“As of the current financial year, its outstanding order book stands at RM4.9bil, of which RM650mil was newly secured during the quarter under review,” said Kenanga Research.

MIDF Research and HLIB Research are reiterating their “buy” calls on IJM Corp, with respective target prices of RM2.11 and RM1.95 for the counter, while Kenanga Research is keeping its “market perform” call with a target price of RM1.75.

The latter research remained cautious over the stock on the back of the restructuring of the Besraya Highway and IJM Corp’s loss-making toll roads, namely the West Coast Expressway and Kajang-Seremban Highway due to low traffic volumes.

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