IJM announced that it has been awarded a contract worth RM530m for the construction of Phase 1, TRX Residences. With the award, IJM outstanding orderbook increases to c.RM5b translating to healthier 2.6x cover on FY19 construction revenue. Going forward, we expect an award amounting to c.RM650-700m worth of external construction works (Light City project) to materialise soon. Tenderbook stands at c.RM4b consisting of domestic projects equally split between infra and building jobs. Maintain forecasts. Maintain HOLD rating with same SOP driven TP of RM1.93. Our TP implies P/E of 29.5x for FY20, 22.0x for FY21 and 18.7x for FY22.

NEWSBREAK

Decent job award. IJM announced that it has been awarded a contract worth RM530m by LQ Residential 1 Sdn. Bhd.,a JV between Lendlease and TRX. The contract entails superstructure works for two blocks of serviced apartments known as TRX Residences (residential component of the 17-acre TRX Lifestyle Quarter). Works for the project is expected to commence in May-2020 with an estimated construction period of 36 months.

HLIB’S VIEW

Ending the drought. The contract award brings an end to a contract drought running since Sept-18. With the award, IJM outstanding orderbook increases to c.RM5b translating to healthier 2.6x cover on FY19 construction revenue. Essentially, the award is for construction of Phase 1, TRX Residences. Ultimately, TRX Residences will comprise six towers of 40 to 57 storeys each. There are indications that IJM will bid for a slice of the pie for the subsequent phases.

Construction. Going forward, we expect an award amounting to c.RM650-700m worth of external construction works (Light City project) to materialise soon. Additionally, IJM should secure an award for the ECRL due to its logistical advantage in Kuantan. Tenderbook stands at c.RM4b consisting of domestic projects equally split between infra and building jobs (excluding Light City and ECRL).

Property. Company remains on track to achieve its target of RM1.6b sales for FY20 after hitting RM1.2b for 9MFY20. For 1HCY20, IJM is planning to launch projects with a cumulative c.RM1.4b anchored by Rimbayu and Riana Dutamas. Separately, management revealed that the Royal Mint project in London (GDV: GBP200m) has been handed over to buyers in 4QCY19 with a take-up rate of 90%.

Kuantan port. Throughput at Kuantan Port remains healthy amid the Covid-19 outbreak. We understand from management that operations at Alliance Steel (estimated throughput 7-10 fwt p.a.) so far are unaffected. Prospects for sustained throughput growth are intact with new MCKIP investors such as Maxtrek Tyres (in land clearing phase) and NewOcean Energy (pending EIA). Recent investors like ICP and Camel Power have started operations in Aug-19 and Oct-19 respectively.

Forecast. Maintained as the contract win falls within our replenishment assumptions.

Maintain HOLD, TP: RM1.93. Maintain HOLD rating with same SOP driven TP of RM1.93 and maintaining our discount at 40% on SOP value of RM3.22. Our TP implies P/E of 29.5x for FY20, 22.0x for FY21 and 18.7x for FY22.

Source: Hong Leong Investment Bank Research - 11 Mar 2020