IJM Corp’s FY23 core net profit jumped 70.8% YoY, led by earnings recovery across its non-core divisions. Both the property and industry division recorded >100% YoY improvement in earnings at pre-tax level on the back of stronger property sales and land monetisation, as well as better demand and average selling price (ASP) for its concrete piles. Cumulatively, FY23 core net profit was above ours and street estimates, accounting for 115.7% and 114.5%. In view of higher construction activities going into FY24, coupled with renewed demand over building materials,  we doubled up our FY24 construction orderbook replenishment assumption to  RM3bn and account for higher sales margin for its industrial products. Hence, we adjust our FY24-26F forecast by +9.5% on average. Our Outperform rating is maintained with a revised sum-of-parts TP of RM2.10 (from RM1.97 previously) following the changes made to our forecast. The Group declared a second interim and special dividend of a total of 6sen per share this quarter. Thus, total dividend for FY23 amounted to 8sen/share, rendering a dividend yield of 5.1% at current share price.

• Flattish topline YoY however. The Group revenue was led by recovery  across all non-core divisions, registering double-digit growth YoY. But,  despite hitting record-high property sales at RM2.8bn, the division’s revenue actually slumped 25.2% YoY after stripping out the RM870m  sales proceed from Bandar Rimbayu land monetisation. On the other  hand, industry and infrastructure divisions are giving signs of recovery, the  topline grew 16.9% and 18.2% YoY as the economy reopens, boosting  demand for industrial products and tollway traffic volume.

• Pretax profit advanced 51.9% YoY. Earnings at pretax level was  supported by property and industry division, recording >100% jump YoY  as a result of higher profit margin derived from the current portfolio of  ongoing property development projects as well as improved industrial  product margins from higher ASP and lower production cost per unit in  manufacturing.

• Outlook. In view of higher construction activities going into FY24, coupled  with renewed demand over industrial products, we anticipate better days  ahead, going into 1QFY24. Overall, the weakness in property division is  likely to be mitigated with the pick-up in activities across industry and infrastructure divisions. We expect the Kuantan port throughputs to  recover exponentially, in tandem with the reopening of China economy

Source: PublicInvest Research - 30 May 2023