IJM has secured RM505m contract for construction of Affin’s 47-storey corporate headquarters at TRX. The works are scheduled to be completed by December 2020. With the latest job win, orderbook is now estimated at RM9.3bn, implying a cover ratio of 3.9x. While we remain cautious on the macro job flow outlook following the new government’s review on mega projects. Nonetheless, IJM’s track record as a well-managed contractor should enable it to thrive under more transparent and competitive industry landscape in the long run. Forecast unchanged as YTD job wins are still within our replenishment assumption. Maintain BUY with unchanged SOP-drive TP of RM2.22.

NEWSBREAK

Bags new contract. IJM announced that it has been awarded RM505m contract from Affin Bank Berhad for construction of Affin’s 47-storey corporate headquarters at Tun Razak Exchange (TRX), Kuala Lumpur. The completion period is 26 months, which is expected to be completed by December 2020.

HLIB’s VIEW

First construction job win. This is the first construction job win in FY19 for the company. This brings IJM’s orderbook to c.RM9.3bn which translates to a healthy cover of c.3.9x on FY18 construction revenue.

Cautious on job flow outlook. While this contract win is positive, we remain cautious on the overall macro job flow outlook. This follows from the new government’s move to put all mega projects under review which would inevitably result to project rollout delays or an outright cancellation. However, IJM’s track record as a well-managed contractor should enable it to thrive under a more transparent and competitive tender industry landscape in the long run.

Forecast. Unchanged as YTD job win is still within our full year replenishment assumption of RM1.0bn. Our assumption is lower than RM1.5-2.0bn orderbook replenishment guidance by management as we prefer to remain conservative at this juncture given the uncertain job flow outlook post GE14.

Maintain BUY, TP: RM2.22. Maintain BUY rating and SOP-driven TP of RM2.22. Our TP implies P/E of 15.1x for FY19 and 14.1 for FY20.

Source: Hong Leong Investment Bank Research - 5 Sept 2018