- We maintain our BUY recommendation on IJM Corp. Our fair value of RM6.75/share, based on the sum-of-parts (SOP) methodology, is under review pending the release of IJM’s FY14 results ended March 2014 on 27 May 2014.

- Based on an announcement by Kumpulan Europlus (K Euro) on Bursa Malaysia, the Malaysian government has appointed a consortium comprising K Euro and IJM as turnkey/engineering and procurement contractor for the West Coast Expressway (WCE) project.

- The contract would be based on a fixed sum of approximately RM5bil.

- We understand that the project will be carved under two major portions.

- IJM has been appointed as the contractor to undertake Sections 3, 4, 5, 8 and 9 of the WCE at a combined cost of ~RM2.8bil.

- The second portion, representing contracts for Sections 1, 2, 6, 7, 10 and 11, would be awarded on an open tender basis. The estimated combined sum of these packages is ~RM2.2bil.

- We also believe that IJM stands a good chance to secure a few packages under the second portion as it has the advantage of redeploying some of its existing equipment from its own work packages. This suggests some more upside to contact flows coming from WCE.

- Construction works are set to commence by end-3Q14 or 4Q14. The entire project will take five years to complete.

- But what is clear is that IJM’s contract momentum is rising. The group had only last month, secured a building contract worth ~RM396mil at Damansara Uptown.

- We maintain our forecast for now, as the upcoming WCE contract form part of our existing orderbook. For the financial year to date (FY15F), new contract wins amounted to ~RM3.2bil.

- Other upcoming job opportunities may include:- (i) Kuantan Port expansion Phase 1, (ii) RAPID civil works; and (iii) Menara Warisan.

Source: AmeSecurities