News IJM announced that it has secured a construction contract from Sime Darby Sunrise Development Sdn Bhd for mixed development projects in Bukit Jelutong a.k.a “RADIA” for RM435.3m.
The project will be executed in phases with Phase 1 and 2 commencing 15 Dec 2014 and Phase 3 and 4 on June 2015. The project will take 2-3 years to complete.
Comments This news came in as no surprise as management previously did mention that it is actively looking for property development jobs worth around RM400m. Including this job, YTD, in FY15 (YE: March), IJM has secured RM4.02b worth of new contracts (including WCE works), hitting our FY15 new contracts assumption of RM4.0b spot-on.
Assuming 7% PBT margins and average project’s duration of 2.5 years for all 4 phases, this project should contribute about RM9.1m per annum (1.2% of our FY16 net profit) until FY17.
What’s next? Based on the previous Analysts’ Briefing, besides this job, management had indicated that it is actively looking for new jobs namely: (i) Kuantan Port expansion (RM1.1b), (ii) KL118 Menara Warisan (RM2.0b), (iii) LRT3, (iv) MRT2, and (v) Penang Integrated Transport.
Outlook Remains bright in the short-long-term. We reaffirm our view that IJM is in the midst of entering a new phase of growth as almost all of its businesses are in “earnings expansion mode” as: (i) it has a fat construction orderbook of RM5.5b (including WCE works of RM2.8b and RM400m internal jobs) and potential new wins of RM1.0-RM2.0b which will provide earnings visibility for at least the next four years, and (ii) it is in the midst of completing the IJM Land’s privatisation exercise (3Q15) which would then boost its PATAMI by another 20% in FY16.
Forecast Unchanged for now as the jobs value is within our estimates. We would consider revising higher our earnings should the group announced significant new jobs before its year-end i.e. March 2016.
Rating Maintain OUTPERFORM
We advocate investors to accumulate IJM given its deep value backed by its exciting near and long-term growth prospects.
Valuation Maintain our SoP-based Target Price of RM7.66. Our TP implies 17.7x FY16 PER, in line with its historical 5-year PER range of 15-18x.
Risks to Our Call Lower-than-expected orderbook replenishment, slower-than-expected construction progress, higher-than-expected input costs and lower-thanexpected property sales.
Source: Kenanga
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