Investment Highlights

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

• IJM has been awarded by the National Highways Authority of India (NHAI) a 20-year build-operate-transfer (BOT) concession (including a 30-month construction period) for the Solapur-Bijapur section of the national highway in Maharashtra and Karnataka states. The 109km 4-laning highway project is estimated to cost INR2,325 crores (RM1.5bil). It will come with a grant of INR367 crores (RM236mil) from the NHAI.

• We are positive on the latest development. We believe the project will offer IJM two bites at the same cherry, i.e. construction works, and upon completion, recurring tolling incomes.

• With the latest BOT highway project in India, IJM’s YTD (FY March 2018) construction job wins have added up to RM3.1bil (which is consistent with our construction order book replenishment assumption of RM3bil for FY18F). Meanwhile, its outstanding construction order book has increased to a whopping RM10.6bil based on our estimates.

• We believe it is premature to reflect the concession's DCF value in our SOP-based FV for IJM because the project is still subject to financial closure, construction risk, and upon completion, the traffic risk.

• 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 sectorspecific cyclical downturns, resulting in better earnings stability.

Source: AmInvest Research - 23 Nov 2017