IJM announced that its subsidiary, IJM Construction has secured two jobs for a total of RM328m. Jobs include the construction of residential towers at The Light City, Penang and infra and public realm works at TRX, KL. With the new jobs, IJM’s outstanding construction orderbook now stands at RM5.3bn, translating into 2.5x cover based on FY20 construction revenue (53% buildings; 7% Infra; 39% roads). We maintain our FY22 replenishment forecasts of RM1.5bn (22% achieved). Other potential job opportunities are MRT3, ECRL, various domestic PFI opportunities and highways in India . Maintain earnings forecasts. Maintain BUY with higher TP of RM2.09 after increasing our target construction P/E multiple from 10x to 15x inline with other large contractors. Stock trades at P/B of 0.71x (-1.4SD from 10 year mean). Key catalysts include MRT3, 12MP and potential asset monetisation

NEWSBREAK

Replenishing orderbook. IJM announced that its wholly owned subsidiary, IJM Construction has secured two separate construction contracts worth a total RM328m. The scope of works are for construction of Mezzo Residence, The Light City Penang (RM238m) and building infra and public realm works at TRX (RM90m). The TRX job is expected to start immediately finishing in 14 months while Mezzo Residence will commence in June 2021 taking place over 42 months. These jobs mark IJM’s first batch of contracts secured in in CY21 after securing roughly RM2bn in CY20.

HLIB’S VIEW

Within expectations. Developments are within our expectations as management has previously guided for c.RM1.4bn of jobs from The Light City materialising by FY21. In total, jobs secured from the development amounts to RM1.42bn. To our understanding, all construction works at The Light City have been rolled out. Timeline for second stage of Phase 2 has not been disclosed but we believe would likely take place over the longer term. With the new jobs, IJM’s outstanding construction orderbook now stands at RM5.3bn, translating into 2.5x cover based on FY20 construction revenue (53% buildings; 7% Infra; 39% roads). We maintain our FY22 replenishment forecasts of RM1.5bn (22% achieved). Other potential job opportunities are MRT3, ECRL, various domestic PFI opportunities and highways in India.

Forecast. We make no changes to our earnings forecasts as job win is within expectations.

Maintain BUY, TP: RM2.09. Maintain BUY with higher SOP driven TP of RM2.09 (from RM2.01) having increased our target P/E multiple for the construction division from 10x to 15x, on par with our valuation for large construction players and updating for IJMP’s TP of RM2.31. TP is derived based on 30% discount to SOP value of RM2.98. Stock trades at P/B of 0.71x (-1.4SD from 10 year mean). Key catalysts include MRT3, 12MP and potential asset monetisation.

Source: Hong Leong Investment Bank Research - 30 Apr 2021