• HLIB Institutional Research has a BUY rating on IJM with SOP target price of RM3.92, or 16.7% upside. IJM remains our top proxy pick for cons truction sector as it offers strong growth prospects (FY15-18 core PATAMI CAGR of 17%) at undemanding P/B of 1.39x agains t peers ’ 2.12x.
• IJM’s orderbook s tood at RM6.7bn, implying a s uperior cover ratio of 7.5x. Given such a strong cover ratio, we expect earnings momentum to accelerate strongly in the coming quarters once IJM starts running down its orderbook. New contract procurement prospects are good as it will be tendering for the remaining West Coast Expressway contracts worth RM2.2bn, RM16bn for MRT Line 2 and RM9bn for LRT Line 3 next year.
• Poised to retest RM3.50-3.60 zones amid impending 200-d SMA breakout. From 52-week high of RM3.69 on 21 Apr, IJM’s s hare prices tumbled 22.2% to a low of RM2.87 on 8 Sep before closing at RM3.36 last Friday. We are optimistic that IJM share prices can swing past immediate resistance at RM3.39, s upported by bottoming up os cillators and rising volume. To recap, las t Friday’s 8.4m shares transacted was 27% higher against 1M average of 6.6m and 87% higher than 3M average of 4.5m shares.
• A decisive breakout RM3.39 should lift prices towards RM3.50 (76.4% FR and downtrend line) and RM3.60 (R2 or 16 Jul high), before our LT price objective of RM3.69. Key supports are RM3.28 (50% FR) and RM3.18 (38.2%). Cut loss at RM3.14.

Source: Hong Leong Investment Bank Research - 26 Oct 2015