IJM Corp reported a lower headline net profit of RM74.2m (-20.8% YoY) for 2QFY25 despite higher revenue, primarily due to unrealized foreign exchange (forex) losses amounting to RM70.0m. Excluding non-operating items, the Group's estimated core net profit stood at RM144.2m (+3.6% YoY). The cumulative 6MFY25 results were within both our and consensus estimates, making up 44.8% and 47.5% of full year forecasts respectively. We remain optimistic about IJM, as we believe that its earnings growth will be continued to be supported by positive outlook across all business divisions, especially the construction segment. We maintain our earnings forecast and reiterate our Outperform call on IJM with an unchanged TP of RM4.20.

• 2QFY25 revenue grew by 4.0% YoY to RM1.5bn, primarily driven by higher contribution from construction segment. Revenue for the construction division increased by 49.8% YoY to RM623.3m, supported by higher construction work activities. This growth was partly offset by lower revenue from other business divisions. Property development's revenue declined by 12.6% YoY due to lower level of work progress and absence of land sales. The Manufacturing division's revenue fell by 15.6% YoY, impacted by lower deliveries of piles and ready mixed concrete products. Revenue from the toll segment decreased by 16.9% YoY due to lower traffic volumes in overseas tollways following the expiry of an overseas toll concession, as well as absence of compensation income after restructuring of the local roll roads in FY25. The Port segment's revenue declined by 6.2% YoY attributed to lower cargo throughput.
• 2QFY25 headline net profit declined by 20.8% YoY to RM74.2m, mainly due to the higher unrealised forex losses amounting to RM70.0m. After excluding exceptional items, 2QFY25 core net profit rose marginally by 3.6% YoY to RM144.2m, driven mainly by higher earnings from the construction segment. The Construction division's profit before tax (PBT) surged 87.7% YoY to RM28.7m, reflecting a stronger order book and increased construction work activities. The manufacturing segment's PBT also grew 7.2% YoY to RM47.9m, despite lower revenue, mainly due to higher operational efficiency achieved. These gains were partially offset by lower earnings contribution from property segment (-60.4% YoY), the port segment (-19.3% YoY) and toll division, which slipped to losses of RM1.1m due to higher losses recorded by its Argentinian associate and the absence of compensation income from the local toll roads.
• Outstanding order book of RM6.4bn. IJM will continue to focus on the timely execution and completion of its outstanding construction orderbook of RM6.4bn, providing 2-3 years of earnings visibility. Cumulative YTD new wins amounted to RM2.1bn, representing 42.0% of its FY25 orderbook replenishment target of RM5.0bn. With the current orderbook in hand and the anticipation of further job wins underpinned by infrastructure spending and opportunities in data centre and industrial property sectors, the Group is well-positioned for an improved performance in FY25.

Source: PublicInvest Research - 28 Nov 2024