• Overview
  IJM Corporation Berhad (IJM) delivered a steady 2Q23 form following  evenue that jumped by 12.4% YoY and 22.6% QoQ to RM1.07bn.  Moving forward, the acquisition of Radiant Pillar Sdn Bhd (RPSB) is set  to be another milestone to drive IJM business. This may also offset the losses in WCE Holdings. 
  Constructions: The company is set to garner better margin following the final stage of several projects particularly the TRX Residence. New projects secured include the 312-bedded government hospital in  Kapar and LHDM office tower in Shah Alam. Project in Penang  (manufacturing facility and commercial tower), in the meantime, is  still in the initial stage. 
  Property: Higher work progress of ongoing projects has contributed to the rise in revenue which jumped by 25.3% YoY and 60.2% QoQ though could have been much higher if not for the sudden drop in  Pound (average Pound per Ringgit 5.2782 in 2Q23; -2.88%). 
  Industry: One of the earnings drivers following revenue that climbed by 22.7% QoQ and 35.7% YoY thanks to higher deliveries of piles,  quarry products and ready-mixed concrete.   
  Infrastructure: Despite higher revenue which jumped by 38.5% QoQ and 35.6% YoY powered by high collection of toll revenue from local and overseas, it has been negated however by lower revenue from port operation due to lower cargo throughout. Even so, pre-tax profit recorded a marked drop due to unrealised foreign exchange losses  (2QFY23: RM35.3mn; 1HFY23: RM68.3mn) given the rise of USD/RM  exchange rate on borrowings, and higher maintenance (resurfacing)  cost for overseas toll division.

• Key highlights.
  Constructions: Current order book remains healthy following accumulated value of RM4.81bn which could last the company for the next 2-3 years on the back of approximately RM1.5bn yearly burn rate. We are optimistic with order book replenishment as IJM could emerge as potential winner upon the rolling-out of mega projects including the civil work package under MRT3.
  Property: To remain steady following unbilled sales of RM3.1bn in  1H23. Moreover, the acquisition of RPSB will give IJM a full control of the flagship project, Bandar Rimbayu, and further maximize the benefit of township project. 
  Industry: Recorded above 1mn tons of balance order book resulting from high export volumes with encouraging prospects from industrial developments. Positively, the labour issues have been resolved.

• Dividend. Declared a 2 sen dividend, in line with usual practise of first interim dividend payment upon announcement of 1H results.

• Outlook. We remain optimistic on IJM FY23’s business outlook with the proposed acquisition of remaining 40% equity interest in RPSB, which should recover the half year RM20mn losses from WCE Holdings.

• Valuation. IJM is currently trading at forward PER of 17.8x which is attractive against the 5-year average of 35.7x. IJM is indicatively undervalued at this juncture.

Source: BIMB Securities Research - 30 Nov 2022