Investment Highlights

• We maintain our forecasts, SOP-based FV of RM3.76 (Exhibit 1) and BUY call.

• IJM's 60%-owned Kuantan Port Consortium Sdn Bhd has roped in a new investor in Kuantan Port, namely, Hong Kong-listed NewOcean Energy Holdings Ltd (NewOcean) which will build and operate a RM5.1bil oil refinery complex (including a tank farm and a blending plant) on a 60-acre site in Kuantan Port.

• According to news reports, the oil refinery complex will be developed over two phases. The first phase with an annual capacity of 1.5mil tonnes will be completed in 24 months, while the second phase with a capacity of 2mil annually will take another 18 months to build.

• We are positive on the latest development. We believe the project offers IJM three bites at the same cherry: (1) annual lease payments for the land to be received from NewOcean; (2) inbound raw materials and outbound finished products that translate to increased throughput at Kuantan Port, upon commissioning of the oil refinery complex; and (3) potentially construction work packages for IJM from the oil refinery complex project (at least the basic infrastructure works).

• While the land lease payments are immediate (but immaterial vs. IJM's earnings base of RM600-800mil), the impact of the project on the port's throughput is likely to come in beyond our 3-year forecast period. Meanwhile, our existing forecasts already assume construction order book replenishment of RM3bil annually in FY18-20F. YTD (FY Mar 2018), IJM has already secured new jobs worth a total of RM1.6bil. We therefore maintain our forecasts.

• We continue to like IJM Corp as it is a good proxy to the booming local construction sector given its involvement in key infrastructure projects such as the West Coast Expressway, MRT2 and Kuantan Port Deepwater Terminal.

• Also, IJM is poised to garner a slice of action in the LRT3, Gemas–Johor Bahru double tracking and East Coast Rail Link, based on its forte and track record in rail projects (Seremban–Gemas double tracking, Delhi Metro, MRT1).

• IJM’s diverse business interests spanning a wide range of sectors which also include property, plantation, building materials, toll roads and ports, should help counter sector specific cyclical downturns, resulting in better earnings stability.

Source: AmInvest Research - 14 Nov 2017