-  We maintain our BUY call on IJM Corp with our fairly value tweaked slightly downwards to RM7.95/share (vs. RM8.00/share previously) as we update its share base following the release of its 1QFY15 results.

-  For the quarter, IJM reported a core net profit of RM141mil (+7% YoY), largely driven by a pick-up in the construction, plantation and property divisions.

-  1QFY15 core earnings constituted 21%-22% of our and consensus full-year forecasts. As expected, no dividends were declared during the quarter under view.

-  Construction pre-tax profits grew 8.3x YoY to RM47mil following a sizeable jump in margins (16% in 1QFY15 vs 1.3% a year ago). The significant improvement in margins was also attributable to lower unrealised forex losses for the division (from RM13mil to RM1mil).

-  Similarly, plantation earnings jumped 10.6x YoY (RM31mil) on the back of higher CPO prices realised (RM2,566/tonne vs. RM2,234/tonne a year ago) and lower plantation upkeep costs.

-  Excluding a RM223mil gain arising from the acquisition of an additional 10% stake in Radiant Pillar that was booked in 4QFY14, core property earnings rose c.39% QoQ at RM115mil.

-  Despite the divestment of a 40% stake in Kuantan Port and higher initial interest cost with the opening of the Besraya East Extension, the infrastructure division (ex-forex movements) recorded a core net profit of RM27mil against minimal profits in 1QFY14.

-  Looking ahead, IJM Corp’s outlook remains bountiful with several catalytic newsflow expected to accelerate in the coming months.

-  They are:- (i) the proposed privatisation of IJM Land (~RM2bil); (ii) sizeable job opportunities of c.RM5bil from West Coast Expressway (RM2.8bil already secured); (iii) Phase 1 of the Kuantan Port expansion; (iv) proposed acquisition of SILK Highway for RM398mil; and (v) foothold into the Malaysia-China Kuantan Industrial Park (MCKIP) through the purchase of a 40% stake in Kuantan Port Holdings from SP Setia.

-  There could be more upside to our SOP value once the Kuantan Port expansion project is completed. IJM’s foreign shareholding stood at 44% as at 31 July 2014.

Source: AmeSecurities