We came away from IJM’s analyst briefing feeling largely neutral to slightly positive. Market was rather indifferent to the proposed share subscription, IJM shares was up by 2% from RM1.47 as of July 25 last traded price. While the Management is cooingly sanguine on the merits of the proposed shares subscription in Pestech, we opined that the synergy between the two companies provide mutual benefits – IJM will be able to leverage on Pestech’s technical know-hows and capabilities in energy transmission and rail electricfication & signalling whereas Pestech could resuscitate its ongoing projects with IJM’s new capital injection. However, post briefing, we expect earnings impact to be muted – we reckoned that FY24-26F will be the earnings recovery years for Pestech. All in all, we maintain our neutral stance on this development, given that there is no significant impact to the Group’s earnings and balance sheet. We retain our forecasts and Outperform call with an unchanged SOTP derived TP of RM2.10, pegged at 15x PER sector average.
Source: PublicInvest Research - 26 Jul 2023
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