• Keep BUY, new MYR2.76 TP from MYR2.47, 28% upside with c.3% yields. IJM Corp’s 9MFY24 (Mar) core earnings of MYR300.9m (+34% YoY) exceeded expectations, accounting for 83% and 81% of our and Street full- year projections. The positive deviation came from a better-than-expected showing from the property division. IJM’s job replenishment trend has improved, and it is in a sweet spot to take on upcoming major infrastructure projects. With that, we forecast a 3-year earnings CAGR of 17%.

• On a segmental basis, PBT for the construction arm plunged by 27% YoY in 9MFY24, partly due to newly secured projects that have yet to pick up pace. Meanwhile, the property segment recorded a PBT growth of 97% YoY in 9MFY24, amid higher work progress for its current portfolio mix of ongoing projects with higher profit margins. Meanwhile, the industrial segment’s PBT jumped 17% YoY due to higher deliveries of piles and ready-mixed concrete. The infrastructure division saw a PBT of MYR154m (9MFY23 PBT: MYR7.7m) amid higher throughput at Kuantan Port (9MFY24: 19.2m tonnes vs 9MFY22: 16.6m tonnes) coupled with the absence of higher resurfacing costs for highways.

• Job flows. IJM secured MYR3.6bn worth of new jobs so far for FY24 (FY23 job wins: MYR1.5bn) – bringing its orderbook to MYR6.6bn vs MYR4.6bn as of end 9MFY23. The current orderbook level is also near the end-FY19 level of MYR6.7bn. Fresh wins between Dec 2023 and Feb 2024 include the aerotrain for Kuala Lumpur International Airport (MYR105m), Malaysia China Kuantan Industrial Logistics Park (MYR147m) and the Rembus Depot for Kuching Urban Transportation System (MYR260m).

• Outlook. Looking ahead, IJM’s tenderbook (which we estimate to easily be above MYR12-15bn) comprises bids related to the three civil work packages for Mass Rapid Transit 3, the New Pantai Expressway extension (estimated at MYR1bn and likely to be known by end-FY24), and industrial facilities. As such, we view that it is still possible for IJM to clinch new job wins of up to MYR4bn or even more for the current financial year. Aside from that, the property development project will be supported by its unbilled sales of c.MYR2.5bn as at end-3QFY24 (end-3QFY23: MYR3.4bn).

• We adjust FY24-26F earnings upwards by 10-11% as we impute higher contributions from the property arm. We are also lowering our holding company discount to 15% (from 20%) in our SOP valuation to reflect IJM’s potential to clinch jobs in Sarawak and Indonesia. IJM, together with a Sarawak-related entity, plans to build a piles manufacturing facility in the state in addition to a proposal to be involved in Indonesia’s Nusantara state civil servant housing project (worth c.MYR1bn). As a result, we arrive at a new SOP-derived TP of MYR2.76 (previously MYR2.47) after ascribing a 2% ESG premium, based on its unchanged ESG score of 3.1.

• Key downside risks include failure to secure contracts in a timely manner.

Source: RHB Research - 29 Feb 2024