It was reported that IJM Corp's Board of Directors is set to meet this week to  deliberate  the  proposed  acquisition  of  1Malaysia  Development  Bhd's (1MDB)  power  assets  held  under  Edra  Global  Energy  Bhd,  according  to industry sources. (Source: The Edge)

Comments:  This comes as a surprise as IJM Corp has no exposure to the power sector in Malaysia currently. It has limited experience in the power sector from the development of a gas-fired power plant in India and owns a 20% stake in the 464MW Gautami power plant in Andhra Pradesh. We are cautious on this development as 1MDB has been facing financial problems due to its high gearing and the acquisition of power assets at high prices. But, IJM has a good track record as white knights in making opportunistic acquisitions of financially-distressed assets and restructuring them. A case in point is the acquisition of Kumpulan Europlus by IJM and the successful revival  of  the  Bandar  Rimbayu  township  and  RM6bn  West  Coast Expressway projects.

We  believe  the  negotiations  are  preliminary  and  the  attractiveness  of  the deal  will  depend  on  pricing  for  1MDB's  power  assets.  It  may  also  not happen  if  1MDB  is  successful  in  listing  the  power  assets  through  an  IPO since it is resubmitting its proposal to the Securities Commission. We retain our BUY call on IJM (TP: RM8.00) given the good growth prospects of its construction and property operations.

Source: Affin Hwang Capital Research - 5 May 2015