IJM  Corp  announced  that  the  70:30  IJMC-KEB  Joint  Venture  had  on  12 December  2014  accepted  the  letter  of  award  (LOA)  from  West  Coast Expressway (WCE) to appoint the JV as the Engineering, Procurement and Construction Contractor to undertake and complete the construction works for  the  West  Coast  Expressway  (Taiping  –  Banting)  for  an  amount  not exceeding  RM5.0  bn.  The  construction  period  of  the  Project  is  five  (5) years.  WCE  is  an  80%-owned  subsidiary  of  Kumpulan  Europlus  (KEB), which is 25.7% owned by IJM Corp, and a 20%-owned associate of Road Builder  (M)  Holdings,  which  is  a  wholly-owned  subsidiary  of  IJM  Corp. Pursuant to the LOA, the JV shall award to IJMC the construction works for Packages 3, 4, 5, 8 and 9 of the WCE project for an amount not exceeding RM2.8 bn. (Source: Bursa Malaysia)

Comment: The announcement confirms what was announced by KEB on 20 May  2014  that  the  Government  of  Malaysia  (GOM)  had  approved  the appointment of a consortium comprising IJM Construction and KEB as the turnkey/engineering and procurement contractor for the construction of the West  Coast  Expressway  (WCE)  project  for  a  fixed  sum  of  RM5.0bn.  The GOM  had  also  approved  the  appointment  of  IJM  Construction  as  the contractor  for  the  construction  of  Sections  3,  4,  5,  8  and  9  of  the  WCE project at a cost of RM2.8bn. Sections 1, 2, 6, 7, 10 and 11, costing a total of  RM2.2bn,  will  be  awarded  to  contractors  on  an  open  tender  basis  in accordance with the concession agreement dated 2 January 2013.

The  acceptance  of  the  LOA  by  the  JV  and  contract  award  to  IJM Construction are positive but within expectations.

No change in our FY15-17 forecasts for IJM Corp, target price of RM7.86 (@16x CY15 EPS) and BUY rating.

Source: Affin Hwang Capital Research - 15 Dec 2014