Aerotrain win takes value of IJM's jobs secured to 75% of FY2024's RM4b target, says RHB Research

• This is based on IJM's 60% share in the project amounting to RM106 million that its subsidiary IJM Construction Sdn Bhd (IJMC) is undertaking with Pestech International Bhd's unit Pestech Technology Sdn Bhd, which has the remaining 40% share.

KUALA LUMPUR (Jan 18): RHB Research said IJM Corp Bhd has secured RM2.9 billion worth of jobs year-to-date for the financial year ended March 31, 2024 (FY2024), compared with its job replenishment assumption of RM4 billion for the period, after its joint venture (JV) company secured a RM176 million job for the automated people mover (APM), or aerotrain, project at the Kuala Lumpur International Airport (KLIA).

This is based on IJM's 60% share in the project amounting to RM106 million that its subsidiary IJM Construction Sdn Bhd (IJMC) is undertaking with Pestech International Bhd's unit Pestech Technology Sdn Bhd, which has the remaining 40% share, it said in a research note on Thursday.

Works are starting this month and are set for completion by March 31, 2025, said the research house.

The APM is IJM’s third transport-related job secured in FY2024 after the East Coast Rail Link spur line and Kuching Autonomous Rapid Transit project, it added.

IJM’s order book has grown to RM6.5 billion, and profitability-wise, it pencilled in an 8% profit before tax margin for the job, it said.

The IJM-Pestech JV is in a consortium with ALSTOM Transport Systems (Malaysia) Sdn Bhd, which was the original equipment manufacturer for the same project.

Alstom will serve as a project coordination lead for the contract worth RM456 million after considering foreign exchange considerations, interest-holding costs, and remobilisation expenses, it added.

RHB Research said it is optimistic on IJM, as it is not only a reliable partner in executing the APM project given its rail credentials, but is also backed up by Alstom’s presence in the consortium, which provides further reassurance for the delivery of the project.

“The reason being is that the latter (Alstom) has a solid track record in previous APM installation works at airports such as Los Angeles International Airport, Dubai International Airport, King Abdulaziz International Airport in Jeddah, and Munich International Airport,” added the research house.

With this, the research house said it made no changes to its earnings estimates for IJM, as the latest job win is within its FY2024 job replenishment assumptions.

RHB Research maintained its “buy” call on IJM at an unchanged target price of RM2.47 based on sum-of-parts valuation.

“Key downside risks include a failure to maintain order book growth,” it added.

At the time of writing, IJM was traded down six sen or 2.84% at RM2.05, translating to a market capitalisation of RM7.44 billion.

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