IJM surprised us with an infrastructure job win worth RM1.3bn from Mass Rapid Transit System SB (MRTS), marking its largest win in terms of contract value since FY20. The Group is awarded Package 2A and 2B Immigration Customs and Quarantine Complex (ICQC) works for the Rapid Transit System (RTS) Link between Johor Bahru and Singapore. Nevertheless, the job is expected to contribute c. 6-7% per annum on average in FY24-27F to the Group’s bottomline during the estimated construction period of 39 months, assuming a low-teen profit margins. Accounting this new win, the Group’s YTD orderbook amounted to RM1.9bn, representing 64% of our FY24 orderbook replenishment assumption of RM3bn. Though IJM has successfully achieved >50% of our FY24 orderbook replenishment target, we maintain our target at RM3bn as we think further job wins in 2HFY24 would likely translate to FY25 earnings. We understand that IJM’s tenderbook of c. RM16bn comprising mainly infrastructure projects with MRT3 taking up >60% of the tenderbook value. Hence, we retain our forecasts for now. Our Outperform call and SOTP derived TP of RM2.10, pegged at 15x PER sector average is affirmed.

• Job details. The job involves the design, construction and completion of the ICQC (Package 2A) and ICQC external works (Package 2B) for the Rapid Transit System (RTS) Link between Johor Bahru and Singapore. Construction works are estimated to commence in 2QFY24 and slated for completion by 3QFY27.

• Largest job win since FY20. The Group’s accumulated orderbook including this job win, stood at RM6.3bn, providing earnings visibility up till FY27. On the other hand, YTD new wins of RM1.9bn represents 64% of our FY24 orderbook replenishment assumption which is also the largest YTD win quantum since FY20 (refer illustration 1). Our projections show that this job would contribute about RM23m in net profit per annum on average, from FY24-27F, assuming a low-teen profit margins, based on certain levels of work completion each year.

• Our thoughts. Though IJM has successfully achieved >50% of our FY24 orderbook replenishment target, we maintain our target at RM3bn as we think further job wins in 2HFY24 would likely translate to FY25 earnings. We understand that IJM’s tenderbook of c. RM16bn comprising mainly infrastructure projects with MRT3 taking up >60% of the tenderbook value. That aside, we are also aware that the Group has ongoing tenders in India and Nusantara.

Source: PublicInvest Research - 13 Oct 2023