UOBKH Research said the near-term outlook of IJM’s construction segment continued to improve.
PETALING JAYA: IJM Corp Bhd
is on track to meet its order book replenishment target of RM4bil for the financial year ending March 31, 2024 (FY24).
This is premised on the fact that the group had secured new jobs amounting to RM2.5bil as of end-December 2023, excluding the RM400mil worth of internal projects, noted UOB Kay Hian (UOBKH) Research.
Noting that IJM was in a pole position to strengthen its order book, the brokerage said in its recent report that the near-term outlook of IJM’s construction segment continued to improve, underpinned by increasingly promising infrastructure job flows.
Potential new wins for IJM could come from the Mass Rapid Transit 3 and Penang Light Rail Transit projects; extension of New Pantai Expressway; Indian highways; and various industrial building jobs, including data centres, UOBKH Research said.
“The group’s potential involvement in the Kuala Lumpur-Singapore high-speed rail (HSR) is also seen as a huge catalyst, despite with limited visibility in terms of funding structure and scopes involved,” it added.
IJM last week confirmed that it was participating in the request-for-information exercise for HSR via a consortium with Berjaya Land Bhd, Keretapi Tanah Melayu Bhd and Malaysian Resources Corp Bhd.
The group had earlier raised its FY24 order book replenishment target to RM4bil from an earlier target of RM3bil amid brighter prospects in the construction sector.
UOBKH Research raised its target price (TP) for IJM to RM2.13 a share from RM1.70, with an unchanged “hold” call on the counter.
The higher TP for IJM’s shares was based on higher earnings projection for the company as well as a higher valuation multiple for the construction segment (from 12 to 14 times) amid brighter replenishment outlook.
UOBKH Research raised its earnings forecasts for IJM by 2% for FY24, 8% for FY25 and 12% for FY26 to factor in higher order book replenishments as well as the better earnings contributions from the West Coast Expressway (WCE), in which it holds an effective stake of 41%.
“We believe WCE is poised to deliver substantial earnings improvement given the robust incremental toll collections.
“Management also expects the highway to eventually be cashflow-positive after hitting an average daily traffic of around 300,000 vehicles within one to two years after it opens all 11 sections,” UOBKH Research said.
Meanwhile, IJM’s property segment would be backed by strong unbilled sales of RM2.5bil and new launches worth RM2.4bil, the brokerage said.
In addition, IJM’s foray into the logistics space would also be earnings accretive.
To recap, IJM has ventured into the industrial space via the acquisition of a 25% stake in Global Vision Logistics, which is the developer of Shah Alam International Logistics Hub.
Based on a monthly rental rate of RM1 to RM2 per sq ft, 90% occupancy rate, and a 10% net profit margin, IJM’s 25% investment was expected to give rise to an additional net profit of RM1mil to RM2mil per annum once its proposed hub commences operations in 2026.
