IJM Corp’s 1QFY24 PATAMI improved >100% YoY. However, after stripping out exceptional items totalling RM34.2m, core net profit declined 12.5% YoY. The Group reported unrealised foreign exchange gains of RM42.2m from its property receivables from London. All in all, we notice better performance across all business divisions except for its core business division, construction – the division reported 42.4% YoY drop in pre-tax profit due to lower progress billings and high material costs. Despite Group 1QFY24 profit only accounting for 19.8% and 18.7% of our and consensus full year forecasts, we deem it as in line as we anticipate better earnings in the coming quarters, on the back of higher construction billings progress, improved margins for its industrial products and better cargo throughputs. No change to our earnings estimates. All told, we reiterate our Outperform call with an unchanged SOP TP of RM2.10, pegged at 15x PER sector average.

• 1QFY24 revenue advanced 14.3% YoY, led by industry and infrastructure divisions. The Group’s infrastructure division registered a 15.1% improvement YoY attributed by strong recovery in the Kuantan port cargo throughput (1QFY24 throughput is 13% higher YoY from 5.3m tons to 6.0m). Other than that, its industry division enhanced 23.3% YoY on the back of higher delivery of industrial products in the quarter.

• Pretax profit (PBT) rose >50% YoY. We noticed better performance across all divisions except for the Group’s construction division. Construction PBT slumped 42.4% YoY as ongoing projects are still beleaguered by high materials cost. The segment also recorded lower progress billings as works for new projects comprising about 42% of total outstanding order book. Nevertheless, outstanding orderbook remained steady at RM4.94bn which represents earnings visibility for 3-4 years.

• Prospects. The Group has ongoing active tenders in Nusantara and India – IJM has submitted a public-private-partnership (PPP) proposal with a local partner to construct housing for state civil servants worth c. RM1bn, in the new capital of Nusantara, Indonesia. We anticipate the outcome of the Nusantara job bidding to be announced by 3QFY24. That aside, construction progress billings are expected to pick up in the upcoming quarters due to higher progress of work done. YTD new wins represents 21.8% of our FY24 orderbook replenishment assumption of RM3bn. Property segment however, is expected to remain challenging, given IJM’s inventory portfolio comprise of mid-to-high range houses. Currently as of 1QFY24, IJM Land has only achieved 13% of its internal sales target of RM2bn. The Group has 17 upcoming property launches on the pipeline with a combined GDV of RM2.4bn.

Source: PublicInvest Research - 29 Aug 2023