- Maintain BUY on IJM Corp with a higher fair value of RM6.95/share (previously: RM5.71/share), as we rollforward our investment base to FY14F. IJM reported FY13 results that were in-line with expectations. The group declared a second interim DPS of 9 sen (single-tier), taking full-year DPS to 13 sen (net yield of 2%).

- Ex-exceptional items, we estimate core net profit to have risen ~3% YoY at RM438mil. YoY gains for the construction and property divisions were largely offset by lower plantation earnings.

- The momentum in construction billings (+ 9% YoY in FY13) should pick-up from FY14F onwards on higher progress for locally-secured jobs. Construction margins was 10.1% in 4QFY13 (full-year: 7.4%) but should normalise in the coming quarters – as the quarter was boosted by one-off profits from the disposal of its Indian property units.

- Property earnings rose 14% YoY on:- (i) better progress recognition on existing projects; and (ii) profits from the disposal of Menara IJM Land. This is backed by unbilled sales of >RM1.2bil.

- Contributions from the industries division were flattish for the year. Despite higher topline growth driven by Kuantan Port, higher forex translation losses and provisions related to its Indian unit (Gautami Power) combined to cause a 3% YoY reduction in the infrastructure division’s earnings.

- Plantation earnings fell by 27% YoY on faltering FFB volume coupled with lower CPO prices realised (RM2,620/mt in FY13 vs RM3,049/mt a year ago).

- For FY14F, we see several catalysts emerging for IJM:

a) There is greater illumination on orderbook visibility postelections – especially for the West Coast Expressway project where IJM is a strong contender.

b) Similarly, building material arm ICP should see a pick-up in activities from the resumption of ETP projects –notably for its large diameter piles.

c) IJM Land’s strong pipeline of new launches is well positioned to benefit from an expected return of buying interest post-elections. The maiden launch of Bandar Rimbayu last month was already a roaring success.

d)  Potential doubling of Kuantan Port’s capacity with the proposal of a new deep-water port.

e) With a market cap touching RM8bil, IJM is a liquid proxy that should benefit from a return of foreign investor interest in the Malaysian contractor.

Source: AmeSecurities