It has been reported that the Group (IJM) has recently secured three contracts totalling RM680.2m from various parties, with project locations in Segambut and Bukit Kiara, Kuala Lumpur as well as at Batu Kawan, Penang. These three contract awards bring IJM’s YTD contracts wins to eight, worth a cumulative RM1.3bn for FY22. The outstanding orderbook for IJM remains healthy at approximately RM4bn, translating to a coverage ratio of c. 2.1x FY21 construction revenue. We keep our forecasts unchanged however, having imputed this in our replenishment assumption of RM1.5bn in FY22. We are expecting more jobs to be awarded in CY22, riding on the economic recovery post Covid-19 pandemic with more infrastructure-related works to be awarded, the keenly-awaited one being the MRT3 project. The Group is expected to announce its 2QFY22 results later today, (29 Nov). Our Neutral call with SOTP-derived TP of RM2.00 is maintained meanwhile.

• The contracts. The Group has secured three construction contracts worth RM680.2m, comprising of two residential high-rise developments in Kuala Lumpur and a factory in Penang. Assuming a pre-tax profit margin of 7%, these are expected to contribute RM5.8m, RM15.6m, RM15.7m and RM10.5m for its FY22/FY23/FY24/FY25 pretax profits, based on certain billings progress. Details of project are as below: 
  Contract 1 is from JKG Central Park SB, a subsidiary JKG Land Bhd worth RM242.4m for the construction of two tower blocks of service apartments (57-storey and 59-storey), associated recreational facilities such as retail space, carpark podiums and a basement carpark. The service apartments make up Phase 2 of JKG Land’s flagship The ERA @ Duta North project in Segambut. Construction has commenced this month and is scheduled for completion by Dec 2024 (38 months).
  The second contract worth RM382.8m is awarded by Sime Darby Property (KLGCC Resort) SB for the construction of two 41-storey luxury residential towers for the developer’s Jendela Residences within the KLGCC Resort township in Bukit Kiara. This includes five floors of carpark podium, three levels of underground basement, mechanical & electrical facilities, as well as associated recreational facilities. The project will take about 31 months to complete from its scheduled commencement from April 2022 to Nov 2024.
  The third contract, valued at RM55m is for a factory expansion project in Batu Kawan, Penang for Hotayi Electronic (M) SB. Construction for the 190,000 sq. feet production facility and warehouse commenced in Oct and is scheduled for completion in April next year (6.5 months).
• Replenishing orderbook. Inclusive of these contracts, IJM has successfully won eight projects totalling RM1.3bn YTD for FY22, representing 67% of management’s target of RM2bn and 89.3% of our assumption of RM1.5bn. We keep our assumptions unchanged given the potential slower roll-out of mega infrastructure projects. This is mainly due to the government’s strained coffers, lack of sizeable private sector jobs and increased competition currently.
  The Group’s outstanding orderbook remains healthy at approximately RM4bn, translating to a coverage ratio of c. 2.1x based on FY21 construction revenue. Its orderbook comprises a good mix of private and public sector jobs as well as building construction and civil engineering projects. CY22 orderbook prospects is expected to come from a larger portion of the ECRL project (e.g. ECRL spur line to its Kuantan Port) and mega public infra projects namely MRT3 which the group is one of the potential major beneficiaries.

Source: PublicInvest Research - 29 Nov 2021