Analysts optimistic on IJM’s UK site buy but keeps earning forecast unchanged

• Kenanga said IJM’s acquisition of the Shredded Wheat factory site aligns with its UK expansion strategy, building on the success of the Royal Mint Garden project where it first partnered Network Rail, which is the owner of most highway rails in the country.

KUALA LUMPUR (Jan 15): Analysts have kept "buy" calls on IJM Corp Bhd following the latest acquisition for its second property project in the UK, which entails a redevelopment for 811 homes and 150,000 sq ft of mixed-use space in Hertfordshire.

Another acquisition by IJM for a 25% stake in the Shah Alam International Logistics Hub (SAILH) has seen mixed response, as analysts see it contributing to the group’s industrial buildings construction know-how, and to translate to potential works in future phases of development.

In a note, Kenanga said IJM’s acquisition of the Shredded Wheat factory site aligns with its UK expansion strategy, building on the success of the Royal Mint Garden project where it first partnered Network Rail, which is the owner of most highway rails in the country.

“The acquisition is expected to be completed by the first quarter of calendar year of 2024 (1QCY24), and the approval for 811 homes and 150,000 sf of mixed-use space on the historic Shredded Wheat factory site in Welwyn Garden City,” Kenanga added.

RHB Research separately said that based on a viability executive summary, the GDV of Wheat Quarter site “would be at least £300 million [RM1.78 billion]”.

On the RM89 million purchase of the 25% stake in Global Vision Logistics (GVL) — the entity behind the Shah Alam International Logistics Hub (SALIH) — Kenanga Research said the earnings would be “insignificant” to group total at around RM1.5 million to RM2 million upon completion by mid-2025.

This compares with IJM projected net profit of over RM400 million from FY2024 onwards.

“More importantly, IJM could be poised for a slice of the action in the construction contract for its next phase of development, in addition to the current Phase 1 in which IJM has secured a RM653.6 million building job in June 2023,” it said.

Both Kenanga and RHB have kept earnings forecasts unchanged. For RHB, it said this is because earnings contribution from the GVL purchase is seen as minimal, and ahead of further details of the UK site project.

As such, Kenanga has maintained its "utperform"call on IJM with unchanged target price of RM2.31, compared with its last traded price of RM2.22 at noon market break.

However, RHB has raised its TP to RM2.47, from RM2.21, because it ascribed to a higher target price-to-earnings ratio of 16 times for its construction arm, from 12 times previously.

This is to reflect “the level IJM was trading at during the mid-2017 construction upcycle”, adding that it ascribed a 2% ESG premium on higher ESG score of 3.1, from 3 previously following the purchase into SAILH who aims to achieve local GreenRE silver rating.

The stock’s valuation is relatively undemanding, as it was trading at 0.7 times FY2025 price-to-book value, the research house added.

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