9MFY22 CNP of RM114m came broadly within our/consensus full-year estimates as we anticipate a similarly strong 4Q to achieve our targeted projections. No dividends as expected. 9MFY22 property sales of RM2.1b came above expectations while YTD construction replenishment of RM1.3b is deemed below target. Consequently, we raise FY22E sales assumption to RM2.5b while reducing FY22E replenishment target to RM1.5b. Meanwhile, Kuantan Port’s cargo throughput of 16.9m tonnes is within expectation. In tandem with the revision in assumptions, FY22E/23E CNP is increased by 6%/3%. Reiterate OP with an unchanged SoP-TP of RM1.90.

Within expectations. 3QFY22 CNP of RM98m led 9MFY22 CNP to RM114m - broadly within our/consensus full-year estimate at 61%/53%. We deem this broadly within target as we anticipate all their key segments (construction, property, manufacturing and infra) which were dragged down during the pandemic in 1HFY22 to extend the strong performance registered this quarter into 4QFY22 amidst normalised operating capacities.

No dividends declared this quarter as expected. YTD, a cumulative 17.0 sen dividend has been declared (15.0 sen special dividend from IJMP disposal + 2.0 sen interim dividend), in line to meet our full-year dividend expectations of 21.0 sen.

Highlights. QoQ, 3QFY22 CNP of RM98m improved against a CNL of RM35m registered in 2QFY22 in the absence of a 1.5-month lockdown in the previous quarter. All segments saw improving revenue and PBT.

YoY, 9MFY22 CNP of RM114m is down 31% mainly dragged down by weaker PBT contributions from: (i) construction (-32%) due to weaker PBT margins (-2ppt) and lower revenue progress (-17%) due to movement restrictions and lower outstanding book brought over (RM4.0b at start of FY22 vs. RM4.5b at start of FY21), (ii) property (-60%) from weaker margin mix projects, and (iii) Infra (-50%) from lower port throughputs of 16.9m tonnes (- 19% from 20.9m tonnes).

Property sales above expectation. 3QFY22 property sales of RM1.0b led 9MFY22 property sales to RM2.1b – above our/management’s RM1.8b/RM1.7b target. We believe the outperformance stemmed from the last-minute purchases prior to the end of House Ownership Campaign in Dec 2021. Consequent to this, we increase our FY22E sales target to RM2.5b. 4QFY21 unbilled sales stood at RM2.3b (1.5x revenue cover).

YTD, IJM has achieved construction replenishment of RM1.34b against our/management’s target of RM2.0b. Given that there is only a month left for FY22 (FYE March), our target of RM2.0b seems like a tall order. In light of this, we reduce our replenishment target to RM1.5b. Nonetheless, we understand that there are a number of contracts nearing finalisation but timing of award could flow into FY23. Current outstanding order-book stood at RM4.2b providing c.2.5x cover.

Meanwhile, Kuantan Port’s 3QFY22 cargo throughput of 5.7m tonnes led 9MFY22 to 16.9m – within our FY22E assumption of 24m tonnes (71% of estimates).

Earnings revision. After adjusting for the higher property sales assumption of RM2.5b (from RM1.8b) and lowered construction replenishment, FY22E/FY23E CNP is raised by 6%/3%, respectively. Keep OP on unchanged SoP-TP of RM1.90.

Key downside risks for our call are: (i) lower-than-expected margins, and (ii) slower-than-expected progress in construction works and clearing of property inventories.

Source: Kenanga Research - 25 Feb 2022