PETALING JAYA: IJM Corp Bhd
’s investments in the Shah Alam International Logistics Hub (SAILH) will be insignificant in terms of contribution to its recurring rental and related incomes.
However, the investments will enable the company to capture a slice of the pie in the construction contract for the next phase of development.
On Jan 12, IJM Corp said it had signed a share sale agreement via its fully owned subsidiary IJM RE Sdn Bhd, with logistics provider Swift Haulage Bhd and Hartamas Mentari Sdn Bhd, to acquire a 25% stake in Global Vision Logistics Sdn Bhd (GVL), the operator of SAILH.
The investment follows a RM653.6mil construction contract won by its construction arm, IJM Construction, in June last year.
The investment in SAILH is also part of IJM’s broader strategy to expand into industrial property, complementing its other investments in Exio Logistics Sdn Bhd for two logistics hubs in the City of Elmina, Shah Alam, and the Malaysia China-Kuantan Industrial Logistics Park.
According to Kenanga Research, the 25% equity stake implies associate income of RM1.5mil-RM2mil, or less than 1% impact to IJM’s earnings when the facility runs at full capacity.
The research house believes the purchase price is on the high side as the implied land cost of RM180 per sq ft (psf) is above the asking price of between RM109 psf and RM138 psf for comparable land surrounding the area.
“However, this is justifiable given the development approvals secured for the logistics-hub project. The total development cost of SAILH is RM1.3bil (to be completed by 2028) and is to be funded with an Asean Green Sri Sukuk (nominal value of up to RM1.5bil),” the research house said.
RHB Research is positive on the deal as it not only provides IJM a new stream of recurring income, but may also strengthen its know-how in industrial buildings when bidding for work on such facilities. It viewed IJM’s deal in SAILH as reasonably priced.
“A RM89mil deal for the 25% stake in GVL translates to RM110 psf for IJM. Our observations of online listings reveal that asking prices for industrial land near the logistics hub range between RM105psf and RM140psf. Independent valuer Knight Frank Malaysia has valued the whole 71-acre site at RM495mil, or RM154psf,” RHB Research said.
Meanwhile, IJM Corp also announced that its property arm, IJM Land Bhd, had acquired an 11-acre brownfield site known as The Wheat Quarter factory site in Welwyn Garden City, Hertfordshire, Britain. The site has been approved to be redeveloped for 811 homes and 150,000 sq ft of mixed-use space.
The research house, which has an “outperform” call on the counter, has maintained its forecasts with a target price of RM2.31.
RHB Research is also positive on IJM Corp, maintaining a “buy” call with a higher target price of RM2.47 from RM2.21 previously.
“We are also ascribing a higher target price earnings of 16 times (from 12 times) for the construction arm, reflecting the level IJM was trading at during the mid-2017 construction upcycle.
