- Maintain BUY on IJM Corp with a slightly lower fair value  of RM6.75/share (10% discount to its sum-of-parts value) after imputing some minor housekeeping changes following the release of its 1HFY14 results. Stripping off exceptional losses (unrealised translation losses on USD-denominated debt, partial sale of Trichy Highway in India and start-up cost for Indonesian plantations), core earnings expanded by 29% YoY to RM305mil.

- The property division was the stand-out performer, raking a 1HFY14 pre-tax profit of RM243mil (+72% YoY) on strong sales and higher work progress. Unbilled sales stood at a healthy RM2bil.

- New sales for 1HFY14 were ~RM1.2bil, excluding ~RM900mil achieved for the maiden launch of its Tower Bridge project in London. This puts IJM Land in a strong position to beat the RM2bil achieved in FY13.

- Having completed reclamation works, IJM Land is looking to kick off Phase 2 of The Lights by early-2014. Given the strong response by investors, management is looking to unlock value by bundling the first four parcels of its commercial components (e.g. hotels, convention centres, retail mall) into a SPV.

- This would enable IJM Land to first realise profits from the injection of land into the SPV and subsequently, development profits when the project takes off.

- Construction margins recorded a QoQ improvement to 6.4% in 2QFY14 from only 1.3% in 1QFY14, as better work flows of mainly local projects gain traction. Outstanding order book stands at RM2.5bil; local jobs account for most of it (external - RM1.7bil; in-house – RM750mil). Outstanding legacy Indian jobs have whittled down to ~RM20mil.

- IJM Corp is stepping up its order book replenishment by actively participating in a few tenders, including the proposed SUKE and KIDEX highways.

- The group’s immediate prospects however lie with the West Coast Expressway (WCE) project. The financial close for this highway has been extended by three months to January 2014 pending additional information required by the authorities. Positively, we note that the WCE appears to have the tacit support of bankers, while its equity requirements are mostly in place.

- Similarly, Phase 1 of the Kuantan Port expansion is set to kick-off by end-2014 (capex: ~RM2bil). 

Source: AmeSecurities