3QFY21 CNP of RM106m (+3% QoQ; +146% YoY) lifted 9MFY21 to RM164m (-14% YoY) – above our/consensus full-year estimates due to higher-than-expected property sales and CPO prices recorded. That said, construction replenishment of RM0.9b trails our target of RM1.4b. No dividends as expected. Raise FY21/22E earnings by 12.4%/8.8% post results and reiterate OP with an unchanged SoP-derived TP of RM2.20.

Above expectations as 4Q remain strong. 3QFY21 CNP of RM106m (+3% QoQ; +146% YoY) lifted 9MFY21 CNP to RM164m (-14% YoY). Despite only making up 67%/63% of our/consensus full-year estimates of RM232m/RM246m, the results are considered above forecast as 4QFY20 should remain strong and expected to register CNP of c.RM100m. The outperformance stemmed from stronger property and plantation contributions due to higher-than-expected (i) property sales and (ii) CPO prices recorded. No dividends as expected.

Sales above. 3QFY21 property sales of RM0.38b lifted YTD sales to RM1.1b; above our RM1.2b target. Consequently, we raise our FY21E sales to RM1.4b. The sales are backed by YTD launches worth RM1.4b with a remainder RM0.27b to be launched in 4QFY21.

Highlights. 3QFY21 CNP of RM106m was marginally up 3% QoQ due to stronger property, manufacturing and plantation segments which offset the lower contributions from construction and infrastructure. Unsurprisingly, 1HFY21 was down 14% YoY due to the Covid-19 pandemic lockdowns.

YTD effective construction replenishment at RM0.9b, below our targeted replenishment of RM1.4b considering that the financial year (March) is ending and IJM has yet to secure any new jobs. Consequently, we lower our FY21E replenishment target to RM1.0b (but keep FY22E replenishment of RM1.4b unchanged). In the near future, we foresee potential contract wins from: (i) remaining IJM’s Perennial residential portion worth c.RM150m (50% stake), (ii) ECRL, (iii) Pan Borneo Sabah, and (iv) more building works.

Kuantan Port’s 3QFY21 cargo throughput at 7.0 tonnes – lifting YTD throughput to 20.9 tonnes in line with our 27m tonnage estimate. Strong steel prices in China arising from the economic recovery should support higher throughputs from Alliance Steel – Kuantan’s Ports biggest contributor. FY21/22E earnings raised by 12.4%/8.8% post adjustment for: (i) higher property sales, (ii) higher CPO price assumption but (iii) lower construction replenishment.

Keep Outperform on unchanged SoP-TP of RM2.20. During the Global Financial Crisis recovery period in 2009, we note that IJM’s Fwd. PBV valuations experienced a strong rebound from -2SD to +1.5SD. Juxtaposed against the current context, we think there is further room for share price recovery given that existing Fwd. PBV still straddles between -2SD and -1.5SD despite vaccinations currently underway which should pave the way for a recovery. Consequently, we see strong justifications for a mean reversion play.

Source: Kenanga Research - 26 Feb 2021