IJM Corp’s 6M22 earnings below expectations

Profits were primarily supported by higher construction activities and improved property sales 


IJM Corp Bhd’s six months of 2022 (6M22) normalised earnings fell by 1% year-on-year (YoY) to RM36.64 million, below analysts’ and consensus expectations. 

MIDF Amanah Investment Bank Bhd’s research arm, MIDF Research, said the earnings were primarily supported by higher construction activities and improved property sales, which account for only 11% of full-year estimates respectively. 

For the second quarter of 2022 (2Q22), the group posted a lower construction revenue of RM379.8 million or 37.3% YoY driven by lower construction activities during the lockdown period. 

“As a result, this led to the group to record dismal profit before tax of RM9.6 million or 81.6% YoY. However, we believe the current strong orderbook of the group which stood at RM4.51 billion will be able to propel the group’s earnings momentum in the future,” MIDF Research said in a note recently. 

The research house noted that so far in financial year 2022 (FY22), IJM Corp has secured RM1.4 billion worth of new orders with the biggest are projects related to The Light City (RM238 million) and Jendela Residences (RM383 million). 

Its property development, on the other hand, recorded lower PBT as its sales decreased by 21.7% YoY to RM220.8 million with a PBT of RM14.8 million or 144.7% YoY due to lower business activities. 

“Despite this, 6M22 saw an encouraging sign as property sales recorded to the tune of RM1.1 billion, underpinned by sales from the central region which made up 73% of the total sales,” stated MIDF Research. 

From April to November of the calendar year of 2021, IJM Corp has launched 1,624 units, representing RM1.42 billion in property value. 

“The biggest project is Mezzo, The Light Waterfront Penang with gross domestic value of RM500 million, with 456 units,” it noted. 

IJM Corp is expected to see higher sales in FY22 with the strategic locations for its upcoming property launches, historical strong take-up rate as a reputable property developer and an accommodative environment. 

“We believe the group is able to achieve a similar sales trajectory or higher in FY22, enabling the group to potentially post better property earnings moving forward,” it added. 

Meanwhile, MIDF Research made a downward change to its estimates to reflect its latest view on IJM Corp. 

“This is in line with below expectation financial performance of the company. We are revising top-line and earnings estimates for FY22E to RM5.1 billion and RM257.2 million. 

MIDF Research, however, maintained its ‘Buy’ recommendation and a target price at RM2.12 on IJM Corp, pegged to the FY23 earnings per share to a price-earnings of 20 times. 

“We remain optimistic on the group’s earnings momentum moving forward, predicated on the quick resumption of construction activities benefitting the group’s major business segments across the construction supply chain,” it said. 

MIDF Research said this is also underpinned by the group’s sizable outstanding orderbook of RM4.51 billion with an earnings visibility over the next three to four years. 

“We also opine that the group remains a key and strong contender for the continuation of mega public infra projects such as MRT3 and a potential domestic Kuala Lumpur-Johor Baru High-Speed Rail which would bode well with its orderbook replenishment moving forward,” said the research outfit.