KEY INVESTMENT HIGHLIGHTS

• IJM Corp reported 2QFY20 PATAMI at RM70.1m

• Segments which recorded growth were property (+69.7%yoy), industry (+>11.5%yoy) and infrastructure (+312.8%yoy)

• Property earnings grew +69.7%yoy in 2QFY20, backed by +47.1%yoy increase in revenue

• We slashed our FY20 forward earnings by -9.1% but kept FY21 numbers unchanged

• Maintain NEUTRAL, with unchanged TP of RM1.95

IJM Corp reported 2QFY20 PATAMI at RM70.1m (>100%yoy).

Subsequently, this brought the 6MFY20 earnings +53.0%yoy higher to RM129.5m. Stripping off exceptional items, the 6MFY20 normalized PATAMI came in at RM145.0m which is below expectations, accounting only 36% and 34% of our and consensus estimates. Positively, the group declared a first interim dividend of 2sen/share for the financial year ending March 31, 2020.

In the quarter, segments which recorded growth in earnings were property (+69.7%yoy), industry (+>11.5%yoy) and infrastructure (+312.8%yoy). The latter was IJM’s best performer, underpinned by the expansion of cargo throughput by +43.0%yoy. Other component which has driven up the segment’s earnings includes lower net losses of unrealized foreign exchange.

Property earnings grew +69.7%yoy in 2QFY20, backed by +47.1%yoy increase in revenue and +1.3ppts improvement in margin. The growth was driven by higher sales recorded and completion of some development projects. In the quarter, we understand that sales were mainly contributed by Rimbayu, Shah Alam 2 and Suria Pantai projects.

Plantation’s losses narrowed in the quarter. It recorded LBT of - RM5.0m (+84.4%yoy), a huge improvement from last year. Whilst the CPO’s price YTD was lower, growth in 2QFY20 revenue (+23.4%yoy) was net positive due to higher CPO sales volume. Importantly, we noted that foreign exchange recorded gain in the quarter, reversing the losses in the same period last year.

Construction earnings were flattish in 2QFY20, no thanks to margin contraction and after taking into account the forex losses of RM6.3m. As at September 2019, the group’s unbilled jobs amounted to RM5.1b which indicates >2.5 years of visibility. At this juncture, management remains aware that immediate term outlook continues to be challenging due to scarcity in new construction jobs coupled with a more competitive tender environment.

Source: MIDF Research - 27 Nov 2019