Secures Contract Worth RM1.1bn for RTS Link Project

IJM has accepted a letter of award for a contract worth RM1.1bn with provisional sum of RM155.0mn from Malaysia Rapid Transit System Sdn Bhd.

The contract is mainly for the proposed design, construction and completion of package 2A immigration customs and quarantine complex (ICQC) and package 2B ICQC external works for Johor Bahru-Singapore Rapid Transit System (RTS) Link project.

The contract duration is about 2.5 years and is expected to complete by 30 June 2026.

Our View

This is the second major job win for IJM in FY24, and it helps boost its outstanding order book to around RM6.3bn currently, equivalent to 5.9xFY23 construction revenue.

Recap, RTS Link project is a cross-border rapid transit system connecting Johor Bahru, Malaysia and Woodlands, Singapore. This project's main objective is to help alleviate the traffic congestion on the Johor-Singapore Causeway. The progress of the whole project has reached about 52.0% completion and it is expected to be fully completed by end of 2026.

Assuming a PBT margin of 8.0%, we expect this contract to generate total net earnings of RM67.8mn throughout the construction period.

Forecast

Maintain our FY24 to FY26 earnings forecasts as this job win is within our FY24 order book replenishment assumption of RM2.0bn.

Valuation

No change to our target price of RM1.85, based on unchanged 0.65x CY24 P/B. Downgrade the stock from Hold to Sell due to limited potential upside following the recent price rally.

Source: TA Research - 13 Oct 2023