Results

• 4QFY15 saw revenue of RM1.4bn (-13% YoY, +8% QoQ) and core PATMI of RM98m (-27% YoY, -29% QoQ). For the full year FY15, core PATMI came in at RM481m, down -4% YoY (after removing RM330m in EI for FY14).

Deviation

• FY15 core PATMI fell short of our forecast by 9% and consensus by 19%. The shortfall from against our projection mainly stemmed from the plantation division which saw lower production, lower selling price and forex losses.

Dividends

• DPS of 11 sen was declared (full year: 15 sen).

Highlights

• Riding high on its orderbook. We are not entirely concerned by the 47% YoY decline in construction revenue which was attributed to the timing difference between completed older jobs and the commencement of newly secured ones. With RM5.7bn in new job wins for FY15, IJM currently sits on a record high orderbook of RM6.5bn, translating to a sizable 6.5x cover ratio.

• Still bullish. Despite sitting on an all-time high orderbook, management appeared bullish on the prospects of new job wins. These include several large scale projects under the 11MP such as the LRT3 (RM9bn) PDP role, Pan Borneo Highway (RM27bn), Central Spine Road (RM9bn) and road networks for the TRX (RM1bn).

• Challenging for property. IJM recorded RM1.8bn in property sales for FY15 (FY14: RM2.2bn). Management expects FY16 to be an even softer year and guides that any increase in sales numbers are unlikely. Unbilled sales currently stand at RM1.7bn, offering minimal cover of only 0.8x FY14 property revenue. Sales drivers in the midterm are expected to come from Light 2, Rimbayu, Pantai Sentral Park, Seremban 2 and Sebana Cove.

Risks

• Execution is an avenue to watch out for given the sudden boost to IJM’s orderbook.

Forecasts

• We cut FY16-17 earnings by 8% and 6% respectively as we impute slower property sales.

Rating

BUY , TP: RM8.00

• We believe the key earnings catalysts for IJM are all in the right places. Earnings growth for its construction division is imminent given the sizable orderbook that it sits on. Whilst the property outlook appears subdued, this is somewhat offset by the privatisation of IJM Land which should help clog the MI leakage with a full year impact in FY16.

Valuation

• Despite our earnings cut, our TP is slightly raised from RM7.92 to RM8.00 as we nudge up our construction P/E target from 15x to 16x on FY16 earnings to reflect the superior orderbook cover that it boasts.

Source: Hong Leong Investment Bank Research - 27 May 2015