IJM reported 1QFY20 earnings of RM104m (-10% QoQ, -22% YoY) which were within our expectations and consensus. YoY core PATAMI declined by 22% due to higher tax rate and minority interest due to interest incurred from perpetual sukuk despite stronger performance from all divisions. IJM’s outstanding construction orderbook stands at RM6.1bn, translating into a decent 3.1x cover on FY19 construction revenue. Maintain forecast as the results were deemed inline. We introduce FY22 earnings forecast of RM484.2m. Maintain BUY with lower SOP driven TP of RM2.87 (from RM2.96) after we updated our model following release of annual report. Our TP is derived based on 10% discount on SOP value of RM3.19. Our TP implies P/E of 26.6x for FY20, 23.1x for FY21 and 21.5x for FY22.

Within expectations. IJM reported 1QFY20 results with revenue of RM 1.54bn (+11% QoQ, +7% YoY) and core earnings of RM104m (-10% QoQ, -22% YoY). The latter made up 27% of our full year forecast (consensus: 24%). We deem the results within our expectations as we prefer to remain conservative at this juncture. No dividend was declared for the quarter.

QoQ. Core PATAMI declined by 10% due to lower contribution from all segments except industry division.

YoY. Core PATAMI declined by 22% due to higher tax rate and minority interest due to interest incurred from perpetual sukuk despite stronger performance from all divisions.

Construction. Construction profit increased by 2% despite 2% decline in construction revenue due to higher construction margin. IJM’s outstanding construction orderbook stands at RM6.1bn, translating into a decent 3.1x cover on FY19 construction revenue.

Property. Higher profit from property segment (+2% YoY) has partially offset by weaker property margin despite a strong 38% growth in property revenue. Unbilled sales currently stands at RM2bn, translating into healthy cover of 1.4x FY19 property revenue.

Industries. Profit from industries division recorded a decent growth (+2% QoQ, +15% YoY) which may indicates that the performance from the segment has stabilized under current slow activities in domestic construction industry.

Infrastructure. Revenue and PBT of the infrastructure division increased by 18% and 79% respectively YoY mainly due to expansion of cargo throughput handled by 60% owned- Kuantan Port. Going forward we expect strong performance from infrastructure segment would be driven by continued expansion of cargo throughput handled after lifting of bauxite moratorium and expansion of MCKIP.

Forecast. Maintain forecast as the results were deemed inline. We introduce FY22 earnings forecast of RM484.2m

Maintain BUY, TP: RM2.87. Maintain BUY with lower SOP driven TP of RM2.87 (from RM2.96) after we updated our model following release of annual report. Our TP is derived based on 10% discount on SOP value of RM3.19. Our TP implies P/E of 26.6x for FY20, 23.1x for FY21 and 21.5x for FY22.

Source: Hong Leong Investment Bank Research - 29 Aug 2019