Investment Highlights

• Mixed 6MFY18 results

• PBT expanded through infrastructure, construction and property segments

• Reiterate earnings estimates for FYE18-FYE19

• Nonetheless, we maintain our BUY recommendation with TP of RM4.00 per share

6MFY18 results marked a good start. IJM’s 6MFY18 earnings of RM237.2m (-15.0%YoY) came in lower with ours and consensus’ estimates. Its net profit accounted for 36.2% and 36.6% of ours and consensus’ full-year forecasts respectively. The weak result is in tandem with its 2QFY18’s PATAMI which decreased from RM163.8m in 2Q17 to RM110.8bn (-12.0%YoY) scuppered by bland segment PBT of; (i) plantation; RM18.2m (-26%YoY, 10% of TPBT*) and (ii) infrastructure; RM35.7m (-19.0%YoY, 19.6% of TPBT). However, the negative impact was supported through the positive segment of; (i) property of RM34.2m (+40%YoY, 18.8% of TPBT) and, (ii) industry of RM27.4m (+22.0%YoY, 15.06% of TPBT). We attribute the negative results to the unexpected decline in infrastructure and plantation segments on the back of higher tax rate of 32.0% (+4.5ppts)

Margins from key segments eroded. The deviation in key segments such as infrastructure and plantation is due to cyclicaties (bauxite demand and weather pattern) hence we are not overly concerned unless the trend is repetitive for the next 2 quarters. We are a confident the property projects - Riana South, Bandar Rimbayu and Seremban 2 will continue to support the TPBT due to its affordable price range between RM350,000 to RM750,000. Apart from that, we reckon that the property mart will soften in FYE18 due to the recent doldrum on luxury property sale price of >RM1.0m. Hence, property offered by IJM with a reasonable price range will still be on the safe side.

Reiterate earnings estimates. We maintain our earnings estimates; IJM’s total outstanding orderbook is currently RM8.7bn (which is approximately 48 months or FYE18 1.42x revenue cover).

Maintain BUY. We reiterate our BUY recommendation with an unchanged SOP-based TP of RM4.00 per share.

Source: MIDF Research - 29 Nov 2017