IJM Corp saw a strong finish as net profit surged 241% yoy to RM241m in 4QFY19, lifting the FY19 bottom line to RM419m (+21% yoy). The result was within market expectations but above ours. We were surprised by the lower-than-expected unrealised forex loss and one-off gain for an associate company. Prospects remain challenging for the group. But high construction order book of RM7.8bn and property unbilled sales of RM2.1bn will support 3-year core EPS CAGR of 13%. We reiterate our HOLD call with lifted target price (TP) of RM2.20m, based on 20% discount to RNAV.

Positive Surprise

IJM reported net profit of RM419m in FY19, which was close to market consensus forecast of RM405m but above our estimate of RM242m. IJM recognised a RM111.8m one-off gain from the re-measurement of a financial asset in its 20%-owned associate Grupo Concessionario. However, this was partly offset by one-off loss of RM41m arising from the disposal of its remaining 30% stake in Swarna Tollway and unrealised forex loss of RM46m. Excluding net exceptional gain of RM43m, core net profit of RM376m (-12% yoy) was close to our forecast of RM387m.

Mixed Segmental Performance

Revenue fell 5% yoy to RM5.66bn in FY19 on lower construction (-15% yoy), industry (-16% yoy) and plantation (-16% yoy) revenue, while property (+21% yoy) and infrastructure (12% yoy) revenue was higher. PBT grew 6% yoy to RM648m, driven by property (+67% yoy) and infrastructure (+118% yoy) divisions. Its construction (-21% yoy) and industry (-28% yoy) divisions saw earnings contraction, while plantation incurred a loss of RM43m.

Maintain HOLD

IJM achieved its target property sales of RM1.6bn and replenished its construction order book by about RM0.5bn. We tweaked our core EPS in FY20-21E and introduce FY22 forecast. FY20E PER of 13x is fair considering 3-year core EPS CAGR of 13%. We revise up our RNAV/share estimate to RM2.74 from RM2.45 to reflect higher valuation for its property, plantation and infrastructure segments after rolling forward our valuation base year to 2020E. Based on the same 20% discount to RNAV, we lift our TP to RM2.20 from RM1.96. Maintain our HOLD call.

Source: Affin Hwang Research - 30 May 2019