PETALING JAYA: With IJM Corp Bhd
’s stock down by 14% in the past one month amid the ongoing takeover attempt by Sunway Bhd, arbitrage opportunities have emerged in IJM, says TA Research.
Following the recent share price weakness, TA Research said the market has largely priced in the key overhangs surrounding the IJM stock.
These include the weaker-than-expected earnings performance in the third quarter of financial year 2026, the recent investigations by the Malaysian Anti-Corruption Commission, as well as the broader risk-off sentiment arising from escalating geopolitical tensions in the Middle East.
As a result, TA Research noted that IJM’s share price had declined to RM2.31 as at March 10, creating a substantial arbitrage spread relative to the adjusted theoretical offer price of RM3.07.
“At current levels, the arbitrage gap has widened to over 33%, significantly higher than the about 9.5% spread observed at the time of the transaction announcement.
“In our view, the wider spread largely reflects the discount investors are assigning to IJM’s share price due to uncertainty surrounding the eventual realised value of the offer.
“This stems from the fact that the transaction consideration is predominantly share-based rather than a traditional full-cash offer, leaving the implied value of IJM highly sensitive to movements in Sunway’s share price prior to deal completion.”
This concern, according to the research house, is understandable as Sunway’s share price has declined by about 11% month-on-month, reinforcing investor caution over the eventual value of the share swap consideration.
Nevertheless, TA Research believes the current arbitrage spread appears disproportionate relative to the underlying transaction risk.
“Even after incorporating a reasonable discount of 5.1% to account for share price volatility (lowering down the actual arbitrage gap), we estimate that the arbitrage gap remains commendable at around 26%.
“As such, the prevailing spread continues to present a compelling risk-reward opportunity for investors.”
From a risk-reward perspective, assuming the transaction proceeds as proposed, investors entering at current levels could potentially realise more than 25% upside should the deal materialise.
Conversely, if the transaction does not materialise, the downside risk is relatively limited.
Speaking with StarBiz, an analyst concurred on the arbitrage opportunity and pointed out that Sunway offered to buy IJM shares at RM3.15 per share.
“But that said, there is a big risk the takeover may not happen, if the government-linked shareholders in IJM blocked the deal along with some other minority shareholders.
“Sunway needs acceptance for 50% plus one share for the takeover to at least take place,” the analyst said.
Given IJM’s share price trading between RM2.30 and RM2.75 (between Jan 2 and 9, 2026, which is prior to the deal announcement date), a retreat to the lower bound of RM2.30 would imply a downside of roughly less than 1% from the current level.
“In our view, such downside is likely to be cushioned by IJM’s solid fundamentals, including its sizeable RM15.3bil outstanding construction order book.
“Overall, we believe IJM’s current market price, which trades at a meaningful discount to the offer price, presents an attractive risk reward opportunity with potential arbitrage upside should the transaction proceed as expected.
“As such, we advise investors or shareholders to accumulate the shares and tender their IJM shares into the takeover offer by Sunway in order to realise the value implied by the offer price,” stated TA Research.
It has maintained its target price for IJM at RM3.15, in line with the proposed takeover offer price.
