AmInvest: IJM set to boost orderbook

by S BIRRUNTHA / pic source:

AMINVESTMENT Bank Bhd (AmInvest) has raised its earnings forecast for IJM Corp Bhd to reflect stronger contributions from the group’s property, industry and infrastructure divisions. 

In a note yesterday, the bank raised the construction group’s financial year 2023 forecast (FY23F) by 9% and FY24F by 10%. 

During a meeting last week, IJM informed AmInvest it believed the government’s private funding initiative structure for infrastructure projects would be a norm moving forward as this would alleviate the immediate capital outlay from the government, hence benefitting larger contractors. 

“We believe IJM is a strong contender for infrastructure projects due to its healthy balance sheet and track record. 

“The group also said the impact of rising building material costs is minimal as it has already been accounted for in most of its construction orderbook, whereas for its manufacturing and quarrying division, the cost can easily be passed on to end-users,” the investment bank noted. 

AmInvest has maintained its ‘Hold’ call on IJM with a higher sum of parts-based fair value (FV) of RM1.71 per share against RM1.65 per share previously. 

It added the FV implies an FY23F price-earnings (PE) of 22 times and there is no FV adjustment for environmental, social and governance based on its three-star rating. 

IJM’s outstanding construction orderbook now stands at RM4.2 billion of which RM1.3 billion was awarded in the cumulative nine months ended Dec 31, 2021 (9MFY22). 

Major contracts awarded in the period include the Jendela Residences, KLGCC Resort township (RM383 million), structural works for the East Coast Rail Link project (RM258 million), Phase 2 of JKG Land Bhd’s flagship project, The ERA @ Duta North (RM242 million) and the Mezzo Residential Tower, The Light City, in Penang (RM238 million). 

AmInvest anticipates an order-book replenishment of RM1.5 billion for IJM between FY22F to FY24F. 

Potential new contracts include major infrastructure projects such as the aboveground portion of the Mass Rapid Transit 3 and High-Speed Rail. 

“Earnings visibility is improving as the group posted stronger property sales of RM2 billion in 9MFY22 compared to RM1.7 billion in 12MFY21, and higher manufacturing and quarrying orderbook wins of 1.65 million tonnes in 9MFY22 against 1.34 million tonnes in FY21. 

“We also believe traffic volume in all of the group’s expressways has returned to pre-pandemic levels,” the bank report stated. 

AmInvest highlighted the challenges faced by IJM include an escalation or prolonged Ukraine-Russia war leading to a supply chain disruption and rising building material costs; delays/shelving of megaprojects; and labour supply issues. 

IJM shares closed seven sen or 3.7% lower to RM1.82 yesterday, valuing the group at RM6.63 billion.