IJM Corp announced that its wholly-owned subsidiary, IJM Construction had on  2  January  2015  accepted  the  Letter  of  Award  from  Pearl  Discovery Development  for  the  construction  and  completion  of  superstructure  works for the proposed mixed development known as "Puteri Cove Residences" in Mukim  Pulai,  Daerah  Johor  Bahru  for  a  contract  sum  of  RM538.5m.  The project  involves  the  building  of  three  blocks  of  32-storey  serviced apartments,  one  block  of  5-storey  soho,  serviced  apartment  facilities,  two multi-storey car park podiums, two lobbies and 2-storey retail centre. The construction period of the project is 33 months. (Source: Bursa Malaysia)

Comment:  Having  secured  RM2.8bn  of  contracts  for  the  West  Coast Expressway  project  last  month,  the  new  building  contract  will  push  the outstanding construction order book for the group closer to RM5bn. As it is an  external  building  job,  pretax  margin  at  best  is  expected  to  be  5%-7%.

Assuming a pretax margin of 7%, the new contract is expected to contribute a  PAT  of  RM28m  over  the  33-month  contract  period,  or  approximately RM10m per annum. As that amounts to less than 1.5% of our FY16E-17E core net profit forecasts for IJM Corp, the forecasts are maintained.

IJM  Corp  is  rated  at  BUY  with  a  target  price  of  RM7.86  (@16x  CY15E EPS).

Source: Affin Hwang Capital Research - 5 Jan 2015