IJM’s 1QFY19 core earnings of RM134m (+20x QoQ, +3% YoY) were within our expectations and consensus. Orderbook level of RM8.8bn implies a strong cover ratio of 3.7x. Core PATAMI increased by 3% YoY as higher contribution from property segment was partially offset by lower contribution from plantation and industrial segments. Maintained forecast and BUY with slightly lower SOP-driven TP of RM2.22 (from RM2.23) following adjustment in TP for IJM Plantation. Our TP implies P/E of 15.1x for FY19 and 14.1 for FY20.

Within expectations. IJM reported 1QFY19 results with revenue of RM1.44bn (+3% QoQ, -2% YoY) and core earnings of RM134m (+2006% QoQ, +3% YoY). The latter formed 25% and 26% of our full year forecast and consensus respectively which is within expectations.

QoQ. Core PATAMI increased by more than 20-fold as 4Q18 results were dampened by associate losses from Scomi amounting to RM48m and unusually high effective tax rate at 55.9%.

YoY. Core PATAMI increased by 3% as higher contribution from property segment was partially offset by lower contribution from plantation and industrial segments.

Construction. Construction revenue and PBT were flat YoY if we exclude the impact from forex loss, indicating stable construction margin. IJM outstanding orderbook stands at RM8.8bn, translating into a strong 3.7x cover on FY18 construction revenue.

Property. Property segment PBT increased by 83% YoY following revenue growth of 12% coupled with higher margin. Unbilled sales currently stands at RM2bn, translating into healthy cover of 1.6x FY18 property revenue.

Industries. YoY revenue and PBT of industries segment decreased by 16% and 41% respectively mainly due to lower sales volumes and margins in the piles and quarrying sectors.

Infrastructure. Revenue and PBT of the infrastructure division dropped by 5.1% and 61% respectively YoY mainly due to 28% decrease in cargo throughput handled by port concession.

Forecast. Maintained as the Results Were Inline.

Maintain BUY but lower TP to RM2.22. Maintain BUY with slightly lower SOP-driven TP of RM2.22 (from RM2.23) following adjustment in TP for IJM Plantation (SELL, TP: RM1.89). Our TP implies P/E of 15.1x for FY19 and 14.1 for FY20.

Source: Hong Leong Investment Bank Research - 29 Aug 2018