9M17 CNP was within our, but below streets?, full-year estimates, at 73% and 67% respectively. No dividends declared as expected. No changes to FY17-18E earnings. Maintain MARKET PERFORM with an unchanged Target Price of RM3.51.

In line with our estimate. 9M17 CNP of RM403.1m makes up 73%/67% of our/streets? full-year estimates. We deem that IJM?s 9M17 performance to be still within our expectations as we believe that they will be able to replicate its 3Q17 performance in 4Q17. Disappointment from streets? expectation could be driven by several factors, i.e. (i) lower-than-expected contribution from its infrastructure division, and (ii) lower-than-expected margin from its development division and etc. No dividends declared as expected.

Results highlight. 9M17 CNP only saw marginal growth of 3% albeit: (i) decent revenue growth of 11% driven by all its division except for property and infrastructure division, (ii) lower interest cost (-39%), and (iii) lower minority interest (-44%), being offset by the steep decline from its infrastructure division, which saw its pre- tax profit falling by 94% as its existing cargo throughput only constituted up to one-third of 9M16 due to the ban on bauxite. On a QoQ basis, 3Q17 CNP declined by 9% despite revenue growth of 7% as its performance was bogged down by: (i) higher interest expense (+13%) and the decline in pre-tax margins by 4ppt to 13% dragged by its construction and infrastructure division.

Outlook. On a separate announcement, IJM announced that they have bagged RM1.2b worth of construction order-book replenishment for the construction of a retail mall in BBCC over 40 months bringing its total replenishment for FY17 to RM2.6b. We are neutral on the win as it is still within our RM3.0b replenishment assumption for FY17. Currently, IJM?s outstanding order-book and unbilled sales stand at c.RM8.7b and RM1.8b, respectively, providing earnings visibility at least for the next 3-4 years. We are expecting IJM to bag high-profile jobs like LRT3 and highway jobs. On the property front, they are looking to launch more affordable priced project at the range of RM350.0k to RM750.0k.

Estimates unchanged. Post results, we make no changes to our FY17E and FY18E CNP of RM549.5m and RM612.0m, respectively.

Maintain MARKET PERFORM. We continue to reiterate our MARKET PERFORM call on IJM with an unchanged SoP-driven Target Price of RM3.51, as we believe the weakness in the property market and infrastructure division will be offset by potential positive news flow from the construction sector.

Key downside risks for our call are: (i) lower-than-expected margins, and (ii) delays in construction works.

Source: Kenanga Research - 24 Feb 2017