INVESTMENT HIGHLIGHTS

• Accepted the award of LRT3’s underground segment

• Scope includes tunnelling and construction of stations

• Orderbook increased to RM10.45b

• Reaffirm our BUY recommendation with a target price of RM4.00 per share

Secured RM1.15bn job. IJM Construction Sdn Bhd, a wholly-owned subsidiary of the Company, has accepted the Letter of Award issued by Prasarana Malaysia Bhd and for the construction of the underground segment of LRT3 in Persiaran Hisammuddin, Section 13 Shah Alam for a sum of RM1.15bn.

Scope. The job scope includes the construction of underground tunnel stations, ancillary buildings and other related works. The construction process applies the tunnelling method using boring machines instead of the conventional cut and paste method. Key risks include execution from tunnelling as it involves steep learning curve for the project team as tunnelling know-how is relatively new to IJM and underground cavities due to soil factor.

Duration. The duration of the job is 31 months from 2019-2021 and slated to commence no later than 4Q18.

Orderbook swells over RM10.45bn. With this new contract, the orderbook increased accordingly to RM10.45bn (+12.3% from its previous RM9.3bn orderbook level)

Impact on Earnings. Nevertheless, the impact is positive and falls within our job replenishment assumptions hence we make no changes to our earnings forecast at this juncture. In our view, IJM needs at least RM2.8bn worth of orderbook replenishment for FYE19 to prompt a rerating on the basis of earnings upside.

Recommendation. Due to the recent market sell-off the share price remains at an attractive price. Hence, we maintain our BUY with a TP of

RM4.00 per share based on FYE18 sum-of-parts valuation. IJM remains as our one of top-pick for big-cap construction sector due to formidable execution track record and order book replenishment capabilities.

Source: MIDF Research - 14 Mar 2018