PETALING JAYA: IJM Corp Bhd
is expected to strengthen its position in Malaysia’s semiconductor construction market, with its latest RM1.23bil contract win from AT&S Malaysia.
The job to deliver a semiconductor manufacturing facility at Kulim Hi-Tech Park, Kedah, is seen as providing earnings visibility into the financial year ending March 31, 2028 (FY28) and potentially opening the door to further projects as technology investments expand.
The fast-tracked project is also expected to accelerate order-book replenishment, although execution risks associated with the compressed construction schedule and specialised technical requirements remain key considerations.
Hong Leong Investment Bank (HLIB) Research viewed the award as a breakthrough for IJM in the semiconductor buildout space, marking its first billion-ringgit semiconductor contract as a main contractor.
This is despite its previous experience constructing electrical and electronics and semiconductor outsourced semiconductor assembly and test facilities in Penang.
“We believe IJM’s in-house industrialised building system capabilities were one of the key factors in landing the contract of this scale,” the research house said.
“We estimate the project to yield a high single-digit pre-tax profit margin, with its fast-tracked 14-month construction timeline expected to accelerate earnings recognition in FY27 to FY28,” it added.
Notably, the award brings IJM’s year-to-date job wins to RM3bil.
RHB Research estimates the new contract to have a pre-tax profit margin ranging between 5% and 8%.
“IJM now has a balance order book of RM10.6bil, of which around 55% to 60% is from Malaysia. From Malaysia’s outstanding order book, we project around 60% to 70% to come from industrial-related projects, including data centres, accounting for 60% to 70% of domestic outstanding orders.”
RHB Research made no changes to its earnings forecasts, as the contract falls within its job replenishment assumptions.
Apex Research said the latest award represented about 12% of IJM’s outstanding order book and should contribute modestly to FY27 earnings, with the bulk of revenue recognition expected in FY28.
However, it cautioned that the demanding monthly billing schedule and integrated design-and-build scope could increase cost-overrun risks.
“Following this new contract award, IJM’s FY27 order book replenishment of RM2.8bil has accounted for 35% of our RM8bil assumption.”
Apex Research maintained its FY27 to FY29 order-book replenishment assumptions for IJM at RM8bil per annum.
TA Research sees scope for further job wins, citing IJM’s tender book of more than RM18bil and growing demand for semiconductor-related infrastructure.
“We view IJM’s latest contract win positively as it not only strengthens the group’s exposure to Malaysia’s semiconductor and advanced manufacturing ecosystem, but also positions it favourably to capture further construction opportunities arising from AT&S’ expansion plans and the broader semiconductor investment upcycle in Malaysia,” TA Research said.
HLIB Research, RHB Research and Apex Research maintained “buy” calls on IJM with target prices of RM3.40, RM3.50 and RM3.48, respectively. In contrast, TA Research kept a “sell” call at RM2.59.
Meanwhile, one analyst told StarBiz that the contract from AT&S has further strengthened IJM’s earnings prospects.
“A growing pipeline of semiconductor investments could support IJM’s order book replenishment, although execution remains key to translating new wins into earnings,” he noted.
