News  After less than a month from securing RM435m worth of mixed development contracts, IJM announced that they have secured another mixed development job worth RM538.5m from Pearl Discovery Development Sdn Bhd in Johor. We gather that Pearl Discovery is jointly owned by Pacific Star Group and DB2 Group, both are Singapore-based developer.

 The project involves construction and completion of superstructure works over 33 months for the proposed mixed development known as "Puteri Cove Residences" in Johor.

Comments  Positive surprise. With this new job, IJM YTD FY15 orderbook replenishment of RM4.6b has exceeded

our assumptions of RM4.0b by 14%. In fact, IJM is one of the few contactors under our coverage that has exceeded expectations in terms of job replenishment.

 The project will add RM12.6m p.a. or close to 2% p.a. over FY16-17E, a assuming an average project pretax margin of 7%.

 What’s next? During the previous Analysts’ Briefing, management had indicated that they are actively looking for new jobs which include the following: (i) Kuantan Port expansion (RM1.1b), (ii) KL118 Menara Warisan (RM2.0b), (iii) LRT3, (iv) MRT2, and (v) Penang Integrated Transport.

Outlook  We reaffirm our view that IJM is in the midst of entering a new phase of growth as most of its major drivers are in an “earnings expansion mode” given: (i) a fat construction orderbook of about RM6.0b which will provide a 5–year earnings visibility, and (ii) completion of IJM Land’s privatisation exercise (expected completion: 4Q15) which would boost its net profit by another 20% in FY16.

Forecast  No change to our FY15E earnings as the project was secured in 4Q15 implying more meaningful contributions towards FY16. However, we only raised FY16E earnings by 1% as we conservatively pushed back timing of some of the new orderbook replenishments (expecting RM2.0b new jobs in FY16E) for the year.

Rating Maintain OUTPERFORM

Valuation  We encourage investors to accumulate IJM given its deep value, which is backed by its exciting near and long-term growth prospects. For cheaper entry points, investors may want to consider buying IJMLAND to enjoy 36 sen arbitrage opportunity.

 Our SoP-based Target Price was raised slightly higher to RM7.68, from RM7.66 previously, post our earnings revision. Our TP implies 17.8x 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, higherthan-expected input costs and lower-than-expected property sales.

Source: Kenanga