PETALING JAYA: As the share price of IJM Corp Bhd
declined by over 12% in just three months, TA Research says the stock’s future performance will hinge on “tangible delivery” of its strategic initiatives.
The research house said IJM’s proposed initiatives, which include the listing of its construction arm and exiting India, could help restore investor confidence and narrow the prevailing valuation discount.
A fund manager who spoke with StarBiz also shared a similar view, adding that the management of IJM only has about two years to deliver its promise to unlock value.
“The very reason behind Sunway Bhd’s takeover offer for IJM was due to the fact that IJM management has been dragging its feet to unlock value from the assets.
“If we continue to see a slow delivery of the promised initiatives, investors will punish the stock and the share price will remain well below analysts’ target price,” the fund manager said.
TA Research has a “buy” call on the IJM stock, with a target price of RM3.05 per share.
The stock declined 2.59% to close at RM2.26 at 5pm yesterday.
After Sunway’s takeover offer fell through, IJM has proposed three initiatives to unlock value, one of which is to list IJM Construction Sdn Bhd, which will primarily comprise its Malaysia and Singapore order book exposure.
However, the UK operations under JRL Consortium will be excluded.
“In our view, the proposed listing represents one of the most visible value-unlocking initiatives within IJM’s broader value unlocking roadmap.
“That said, investors may seek greater clarity on the post-listing operating structure, particularly the delineation between IJM Construction and JRL’s UK operations.
“For an illustration, based on our estimated financial year 2026 (FY26) earnings of RM150.8mil for the construction arm and assuming a listing price-to-earnings multiple of 17 times, we estimate that the proposed listing of IJM’s construction division could command an implied equity value of approximately RM2.6bil upon listing,” said TA Research.
At RM2.6bil, this is equivalent to roughly 30% of the group’s current market capitalisation.
“However, the eventual value creation for the existing IJM’s shareholder would largely depend on the listing transaction structure.”
On the exit from the Indian market, TA Research viewed this strategic move positively.
Importantly, the divestment could also unlock capital tied up in relatively lower-return assets.
That said, TA Research said execution risk remains, particularly in identifying suitable buyers and securing favourable valuations for its India assets, especially the toll-road concession portfolio, which could affect the timing and overall success of the divestment exercise.
Meanwhile, the third initiative is to monetise matured assets and reoptimise landbank.
“We view this initiative positively, as these assets have largely entered a mature cash flow phase, making them suitable candidates for capital recycling initiatives.
“Potential monetisation could unlock substantial embedded value, strengthen balance sheet flexibility, and provide additional firepower for reinvestment into higher-growth segments.
“However, we think the monetisation for NPE (New Pantai Expressway) is unlikely, given the group has already secured a RM1.4bil NPE extension which is slated for completion in 2029 and the concession will be extended to 2057.”
Looking ahead, TA Research said IJM’s standalone fundamentals remain intact alongside its ongoing value-unlocking initiatives.
The construction arm’s earning outlook remains solid, backed by a strong unbilled order book of RM17.3bil, implying a robust 6.7 times its construction segment revenue in FY25.
“Order book replenishment visibility also remains clear, supported by RM17bil worth of outstanding tenders,” stated TA Research in a note.
As for IJM’s property division, the research house said it may face a more cautious earnings outlook due to softer-than-expected sales performance.
At the same time, the industry segment remains well supported by continued data centre and infrastructure job flows.
“Meanwhile, port throughput is expected to recover from FY27 onwards following the resumption of production by key client Alliance Steel.
“Steady traffic growth across toll concessions such as Besraya Highway, Lekas (Kajang–Seremban Highway), and NPE should continue to provide a resilient recurring earnings contribution.
“We like IJM for its position as the front-runners for large-scale infrastructure projects, namely, the Penang light rail transit and Nusantara civil servant housing project, and growing presence in the thriving data centre industry,” TA Research said.
