RHB IB upgrades IJM Corp on strong earnings and prospects, raises target price to RM2.21

• The research house said IJM Corp’s job replenishment trend has improved, and the group is well-positioned to take on upcoming major projects, such as the civil work packages for Mass Rapid Transit 3, the New Pantai Expressway extension — estimated at RM1 billion — and to be supported by some warehouse and semiconductor facilities projects. 

KUALA LUMPUR (Dec 1): RHB Investment Bank Research (RHB IB) has upgraded its rating on IJM Corp Bhd (IJM) to “buy” at RM1.18, with a higher target price of RM2.21 (previously RM1.99) based on sum-of-the-parts valuation, following the group’s better-than-expected financial performance in the first half of financial year ended Sept 30, 2023 (1HFY2024).

In the note on Friday, the research house said IJM Corp’s job replenishment trend has improved, and the group is well-positioned to take on upcoming major projects, such as the civil work packages for Mass Rapid Transit 3, the New Pantai Expressway extension — estimated at RM1 billion — and to be supported by some warehouse and semiconductor facilities projects. 

According to RHB IB, IJM has secured RM2.8 billion worth of new jobs so far for FY2024, bringing its orderbook to RM6.4 billion, which is near its end of FY2019 level of RM6.7 billion. The group expects to clinch new job wins of up to RM4 billion or more for FY2024.

“Major job wins include the Immigration, Customs and Quarantine Complex for the Rapid Transit System Link (RM1.3 billion), East Coast Rail Link spurline connecting to Kuantan Port (RM300 million), and an ancillary building for Infineon Technologies in Kulim (RM190 million),” RHB IB reported.

Following this, RHB IB has adjusted the forecast financial earnings for the group by upwards 13% to 15% for FY2024F to FY2025F earnings, on the back of higher job replenishment target and the higher contributions from IJM’s property arm.

In addition, the research house added that the potential catalysts for IJM include a faster-than-expected setting up of a joint venture to build a new factory for piles manufacturing in Sarawak, and a possible participation in Indonesia’s new capital in Nusantara, where IJM is finalising its feasibility study on some works to be submitted to the Indonesian authorities.

Commenting on the group financial earnings, RHB IB said the group’s core earnings of RM185.7 million — increased 29% year-on-year — has beat the research house’s full-year estimation.

The research house attributed the positive deviation mainly to a robust performance from IJM’s property division, which recorded a profit before tax (PBT) growth of more than 100% year-on-year (y-o-y) in 1HFY2024, thanks to higher work progress at ongoing projects and the sale of two parcels of industrial land at Bandar Rimbayu. 

At the time of writing on Friday, shares in IJM Corp rose six sen or 3.31%, accompanied by 5.83 million shares changing hands. Its market capitalisation stood at RM6.82 billion and the counters were listed among top gainers in Bursa Malaysia in early trade on Friday.

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