IJM Corp Bhd More DC wins; Kuantan Port in a Sweet Spot

■ More data centre wins could follow; it is bidding for TM-Singtel DC in Johor.

■ We raise earnings and DCF forecasts for Kuantan Port, as it could benefit from ECRL completion at end-2026.

■ Reiterate Add with a higher TP of RM4.40.

https://rfs.cgsi.com/api/download?file=cb5956da-573b-4e01-bf14-1be363ffbab3

Data centre projects to feature more; bidding for TM-Singtel DC In our view, IJM’s maiden RM332m data centre (DC) contract win from TM in Johor may be a precursor for more jobs in this space. It is planning to bid for TM and Singtel’s larger hyper-connected AI-ready DC campus in Johor with an initial capacity of 64MW (potentially up to 200MW). Assuming conservative costs of RM30m/MW, we estimate this could amount to RM1.9bn in project value. Our channel checks indicate that the tender will be called this year. The advantage IJM has over Gamuda and Suncon for data centres now is additional capacity given this is its first win. Its track record in building projects is also second to none while its IBS plant in Bestari Jaya and synergistic spun piles are added positives, in our view. In FY3/24, 25% of its industry division’s spun piles were supplied to data centres, industrial warehouses and semiconductor factories. YTD wins stand at RM1.3bn and it is on track to achieve its RM5bn target for FY25F, in our view.

Kuantan Port could benefit from ECRL completion Long-term prospects for Kuantan Port look promising with increased investments into Malaysia China Kuantan Industrial Park (MCKIP) which will benefit from better connectivity once the ECRL is completed in end-26 (Fig 8, 9, 10). Throughput is anchored by Alliance Steel, which plans to raise capacity from 3.5m tonnes p.a. to 10m tonnes p.a. Kuantan Port made RM150m in pretax profit in FY24 (+343% yoy), lifted by a 15% increase in throughput to 26.2m FWT and a tariff hike in Apr 2023. Our revised DCF value for Kuantan Port is RM1.1bn (IJM 60% stake, WACC 8%, average throughput growth of 4% until 2045F). The concession period may be extended for a further 30 years beyond 2045 if it fulfils Phase 2 development of the New Deep Water Terminal by Dec 2039. IJM is mulling whether to proceed with a container port or remain as a bulk port. It also has 1,080 acres of industrial land in MCKIP where 640 acres is earmarked for a mixed development and logistics hub.

Reiterate ADD with higher TP of RM4.40. We raise our FY25F/FY26F/FY27F EPS by 14%/8%/7% (see key changes in this note). We retain Add and raise our TP to RM4.40 assigning a higher target P/E for construction and manufacturing of 21x (vs, 16x), mean since 2005, while we raise our DCF value for Kuantan Port. The re-rating over the past year has been driven by earnings upgrades (Fig 3 – Bloomberg consensus has raised FY25F EPS by 20% over a one-year period but we believe they remain low). We think a re-rating is imminent as its construction and synergistic spun piles business should put it in good stead to clinch more data centres. Also its new wins of RM3.7bn in FY24 reached the S-Curve for meaningful recognition. Our revised TP of RM4.40 translates into 23x CY25F P/E, a tad above 21x mean P/E since 2015. Key catalysts are faster award of projects and higher property sales.