- Maintain BUY on IJM Corp with an unchanged fair value of RM6.79/share; pegged at a10% discount to its sum-of-parts (SOP) value. Stripping off the negative forex movements for its US$-dominated Indian concession debts and net gain on sale from a 36% stake in Trichy highway, IJM’s core net profit rose by 10% YoY. The key movements came from its industries, properties and infrastructure divisions.

- Construction earnings fell by 80% YoY on losses for some JV projects and a weakening Indian Rupee. Construction margins shrank to 1.3% in 1QFY14 vs. 7.6% a year ago (4QFY13: 10.1%). Plantation profits fell 30%YoY on lower CPO prices (RM2,234/tonne) and higher costs for its Indonesian estates, despite a pick-up in sales volumes.

- Property earnings surged by ~60% YoY on strong progress billings for ongoing projects. Core earnings for its infrastructure division jumped by ~74% YoY largely on improved traffic for the existing Kuantan Port.

- We expect IJM’s newsflow to increase in the coming months, lending further support to its share price. Firstly, there is the entry of MWE Holdings as a shareholder of Kumpulan Europlus and the latter’s planned fund raising exercise for the West Coast Expressway (WCE) project. The target is to secure financial close by October 2013.

- The rollout of WCE could provide RM4bil in new jobs for IJM – with another RM2bil coming from phase one of Kuantan Port expansion. These two jobs alone could potentially triple its orderbook to ~ RM9bil.

- Secondly, IJM is eyeing infrastructure opportunities within the budding oil & gas segment, including civil work opportunities for PETRONAS’ RM60bil RAPID project. Thirdly, IJM is reportedly keen on bundling its highway concession assets together and unlocking value via a listing.

- Fourthly, the RM3bil expansion of Kuantan Port is to be finalised by September with the disposal of a 40% stake to China’s Guangxi Beibu. This would double Kuantan Port’s capacity to c.52 mil freight weight tonnes (FWT) p.a. where works could start as early as 4Q13. Our current forecast does not assume the increased throughput for now.

- Fifth of all, IJM Land’s acquisition of an additional 10% stake in the Bandar Rimbayu development for RM52mil would help the former consolidate future earnings potential of this budding township at an early stage.

- IJM has raised some RM300mil from the recent disposal of non-core assets (Trichy Highway, India: RM60mil) and 39% stake in Kemaman Port (RM240mil). This could raise up to 22 sen/share – suggesting some upside to our current yields of 2.8%.

Source: AmeSecurities