PETALING JAYA: MBSB Research has reiterated its “buy” call on IJM Corp Bhd
with an unchanged target price of RM2.82, as the company’s long-term value creation strategy is gathering momentum with the New Pantai Expressway Extension (NPE2) making the toll road portfolio more attractive ahead of a planned monetisation exercise.
The research house remains positive on IJM’s outlook, underpinned by three strategic initiatives – the proposed listing of its construction arm (IJMC), toll road monetisation and the progressive exit from its India operations.
It noted that IJM had also unveiled a RM3bil shareholder distribution plan over the next three years, equivalent to about 83 sen per share in cumulative dividends, representing an implied 40% yield.
“We remain positive on IJM’s outlook, with the value-creation strategy revolving around three key initiatives, namely, the proposed listing of IJMC, toll monetisation and progressive exit from the India operations,” the report said.
MBSB Research said the latest issuance of an initial RM54mil sustainability-linked sukuk or SLS by wholly owned subsidiary New Pantai Expressway Sdn Bhd marked another step towards unlocking value from IJM’s toll concession assets.
The sukuk forms part of a RM1.42bil Islamic medium-term notes programme to finance the RM1.7bil NPE2 project.
Besides diversifying funding sources, the research house said the issuance – described as the world’s first sustainability-linked sukuk for a highway project – reinforced IJM’s environmental, social and governance or ESG credentials through sustainability performance targets.
More importantly, MBSB Research believes the project strengthens IJM’s toll monetisation prospects. It said toll monetisation is expected to contribute RM575mil, or 19.2%, of the company’s RM3bil shareholder value realisation plan over the next three years.
Management intends to package its wholly owned NPE, Besraya and Lekas highways into either a business trust or bilateral arrangements, while also evaluating the inclusion of the West Coast Expressway or WCE after its completion in the first quarter of calendar year 2027.
“We believe NPE2 should enhance the valuation of IJM’s toll portfolio through improved network connectivity and traffic integration,” it said.
MBSB Research said management reaffirmed that NPE2 is on track for completion by October 2029, with overall progress reaching 6%. Once completed, the 15.9-km elevated highway and ramps will improve connectivity between NPE, Besraya and the upcoming Shah Alam Expressway.
Traffic is projected at around 40,000 vehicles per day in the first year of operations, with annual growth of 2% to 3%, providing it a steady earnings stream.
MBSB Research left its earnings forecasts largely unchanged and maintained its sum-of-parts-derived target price of RM2.82, valuing the stock at 22.2 times financial year 2027 forecast earnings, or 0.5 standard deviation above its five-year historical average.
