New contract win bolsters IJM outlook

The contract represents IJM’s stepping stone to rail electrification projects.

PETALING JAYA: IJM Corp Bhd’s latest job win worth RM106mil has bolstered the outlook for the construction and engineering group.

The contract – won through a consortium comprising French train maker Alstom and IJM’s 60:40 joint venture (JV) with Pestech International Bhd – also represents IJM’s stepping stone to rail electrification projects by sharpening its competitive edge for upcoming mega rail projects.

RHB Research has maintained its “buy” call on IJM, while Kenanga Research reiterated “overweight”.

IJM, through its JV with Pestech, was recently awarded a RM176mil job for the automated people mover or Aerotrain project at the Kuala Lumpur International Airport by Malaysia Airports Holdings Bhd.

Works are expected to start this month and will be completed by March 31, 2025.

It was IJM’s third transport-related job secured in the financial year ending March 31, 2024 (FY24) after the East Coast Rail Link (ECRL) spur line and Kuching Autonomous Rapid Transit project.

Based on IJM’s 60% share, the latest job win was worth RM106mil, boosting the group’s total job wins to RM2.9bil for year-to-date, RHB Research noted, adding that its FY24 job replenishment assumption for IJM stood at RM4bil.

RHB Research said IJM’s order book had now grown to RM6.5bil with the latest job win, for which it forecast an 8% pre-tax profit margin.

“The latest job win is within our FY24 job replenishment assumptions.

“Hence our sum-of-parts-derived target price of RM2.47 is unchanged,” the brokerage said, noting the target price was inclusive of a 2% environmental, social and governance (ESG) premium according to its ESG score of 3.1.

“While IJM can be a reliable partner in executing the APM project given its rail credentials, Alstom’s presence in the consortium provides further reassurance for the delivery of the project,” it added.

It cited Alstom’s solid track record in previous APM installation works at airports such as Los Angeles International Airport, Dubai International Airport, King Abdulaziz International Airport in Jeddah and Munich International Airport.

Meanwhile, Kenanga Research said although IJM’s portion of the contract value at RM105.4mil was relatively small, it was positive on this contract as well as the partnership within the consortium, as it would give IJM an immediate presence in the rail electrification space.

“It will be able to strengthen and widen its potential roles in the impending mega rail projects such as Mass Rapid Transit 3 (MRT3) and Bayan Lepas light rail transit (LRT) line,” the brokerage added.

Kenanga Research kept its target price for IJM unchanged at RM2.31.

“We expect a significant revitalisation of the construction sector in 2024, backed by the roll-out of the RM45bil MRT3 project; RM9.5bil Bayan Lepas LRT and six flood mitigation projects reportedly to be worth RM13bil and the vibrant private sector construction market, underpinned by massive investment in new semiconductor foundries and data centres.

“We understand that IJM is also eyeing work packages from ECRL and various projects in Sabah and Sarawak as well as Indonesia,” it added.

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