• IJM clinches RM1.26bn RTS win, bringing YTD FY3/24F wins to RM2.2bn.

• With more clarity on MRT 3 and ECRL Link to Kuantan Port, we believe IJM will likely beat its RM3bn new order win forecast for FY3/24F.

• Reiterate Add and SOP-derived TP of RM2.15.

Clinches RM1.26bn RTS Win

• IJM has secured a RM1.1bn contract from Malaysia Rapid Transit System Sdn Bhd (MRTS) for the proposed design, construction and completion of Package 2A Immigration Customs and Quarantine Complex (ICQC) and Package 2B ICQC External Works for Rapid Transit System Link Johor Bahru–Singapore (RTS).

• The contract comes with a provisional sum of RM155m which entails work that has not been identified at the point of contract award, but the intention is to carry it out.

• Hence, we estimate the total contract win for this project is essentially RM1.26bn.

• The RTS project is slated for completion in Dec 2026.

Likely to Beat FY3/24F New Order Win Target of RM3bn

• With this contract win, IJM has secured YTD-Oct FY3/24F wins of RM2.2bn. The last sizeable contract win was a RM654m contract for the design, execution and construction of phase one of the Shah Alam International Logistics Hub.

• There is no specific margin guidance for this project, but we estimate pretax margins should be in the range of 6-9%.

• This win brings its current outstanding orderbook to RM6.1bn.

• IJM is guiding for RM3bn new order wins for FY3/24F vs. our forecast of RM3.5bn. We think it is likely to beat its guidance if key contract wins such as the c.RM1bn East Coast Rail Link (ECRL) contract to build a spur line into Kuantan Port, packages under MRT 3 and projects in Indonesia, India and East Malaysia come to fruition.

• We understand from IJM that the ECRL spur link into Kuantan Port is at an advanced stage and may be awarded soon. For MRT 3, we expect this project to be mentioned in Budget 2024 on Oct 13, and currently the tender validity has been extended to 31 Dec 3. IJM being a contractor for MRT 1 and 2 could be a key beneficiary of MRT 3, in our view.

Reiterate Add and SOP-derived TP of RM2.15

• We reiterate our Add rating on IJM with an unchanged TP of RM2.15 based on SOP.

• Key catalysts could come from higher-than-expected new order wins in FY24 above its RM3bn guidance, more asset and land monetisation, recovery in Kuantan Port throughput, and higher property sales.

• Key downside risks: a prolonged economic slowdown which could impact all its divisions, as well as higher raw material costs which could crimp its margins.

Source: CGS-CIMB Research - 12 Oct 2023