PETALING JAYA: IJM Corp Bhd
’s UK investment has made a turnaround just as the group is reported to be seeking a corporate initiative to unlock shareholders’ value with the listing of its construction business by the end of next year.
Kenanga Research, following a site trip to the construction and engineering group’s UK operations, noted that IJM’s UK division has successfully transformed its strategy by shifting toward low-risk, high-occupancy assets designed to generate strong recurring income.
This evolution is exemplified by flagship projects like 25 Finsbury Circus in London, which has already secured an anchor tenant on a 20-year lease with an international law firm for the 400,000 sq ft of space, and Royal Mint Gardens (Phase 2), a complex over-railway development currently running one year ahead of schedule.
“This 320,000 sq ft engineering project, built directly over active railway lines, comprises 79 residential apartments and a 454-bedroom hotel that will be leased to Staycity Group for 30 years at nearly £4mil annually,” the research house stated.
Central to this transformation is the Innova joint venture IJM UK has with Network Rail, which grants IJM first-right access to under-utilised railway properties, allowing the group to bypass traditional tendering processes and unlock prime London sites.
“As both parties split planning costs equally down the middle, IJM can unlock high-value, zone-one and zone-two sites, such as Pegley Street near Brick Lane and Dragon Park in Islington, without dedicating massive upfront capital to acquire the underlying land, significantly de-risking their expansion into UK student housing and built-to-rent sectors,” Kenanga Research elaborated on the move.
IJM’s UK business has also achieved a critical milestone with the operational turnaround of JRL Group, in which IJM holds a 50% stake.
After suffering severe losses, JRL has returned to a £2.9mil pre-tax profit and now boasts a £2bil order book of profitable external contracts.
IJM UK has set aggressive targets for JRL, among which is for earnings to climb to £30mil next year and eventually reach a steady £50mil annually.
“Management expects improved margins at JRL and shortened construction timelines to result in the full repayment of IJM’s initial £50mil investment by 2028,” the research house stated.
IJM was also reported to have started the ball rolling on plans to list its Malaysia and Singapore construction divisions by the end of 2027.
A local business daily reported the proposed initial public offering targets a valuation of RM5bil for the business, with IJM expected to retain a 70% stake while distributing 5% in specie to existing shareholders.
This move is a centrepiece of IJM’s broader RM3bil value-unlocking strategy, which also includes toll road monetisation and an exit from Indian operations.
CGS International (CSGI) Research characterised the RM5bil target valuation as “optimistic”, and such a figure would require a significant increase in both the profit base and pre-tax margins compared to current levels.
“Given the timing of the listing by end-2027, this will likely be priced based on financial year ending March 2028 (FY28) financials.
“Based on our back-of-the-envelope calculation, revenue will need to double from FY26 levels to RM7.2bil in FY28 and based on sustainable net margin of 4% and assuming a price earnings multiple of 18 times, this will arrive at an equity value of RM5.1bil, in our view,” the research house noted in its latest research report on IJM.
CGSI Research added that for the proposed listing to reach this valuation, the timing must coincide with continued buoyancy in the data centre and semiconductor sectors.
It emphasised that the most vital message for investors is IJM’s commitment to return RM1.2bil in cash to shareholders, which would represent a significant 14% yield at the current price.
Both research houses maintained a positive outlook on IJM.
Kenanga Research maintains an “outperform” call with a sum-of-parts-based target price (TP) of RM3.35 a share, citing the potential divestment of toll roads as a key re-rating catalyst.
CGSI Research reiterated its “add” call with a TP of RM3.20 a share, expressing confidence in IJM’s synergistic businesses and the ongoing value-realisation exercises.
