KEY INVESTMENT HIGHLIGHTS

• Earnings in-line with expectations

• Construction segment remains flattish

• Vigorous growth in property development segment

• Better performance in plantation sector

• No changes to our earnings estimates

• Maintain NEUTRAL with TP of RM1.95

Earnings in-line with expectations. IJM Corp’s PATAMI fell to RM250.6m in FY20 from RM418.9m in previous period. The figure was in-line with expectations at 97.3% and 100% of our and consensus full year estimates respectively.

Construction segment remains flattish. The topline of this segment was up by only +2.8%yoy to RM457.5m in FY20 from RM444.9m in the previous year. As for profit before tax (PBT), it increased by +5.9% to RM65.6m which was attributable to the slight changes in the overall construction margins.

Vigorous growth in property development segment. IJM Corp’s property development revenue jumped to RM1,026.1m in 4QFY20 from RM357.1m in the year before. The higher topline was driven by completion of the Royal Mint Gardens, London. Despite higher revenue, the property development segment recorded lower profit before tax of RM56.7m from RM70.0m in 4QFY19. The contraction was underpinned by the recognition of impairment of inventories in the current quarter. As for FY20, pre-tax profit was up +0.6%yoy to RM203.3m which was backed by higher revenue recorded as well as the recognition of a foreign exchange gain of RM7.1 million in the current year as opposed to a foreign exchange loss of RM2.8 million in the preceding year.

Better performance in plantation sector. The segment recorded a +18.6%yoy topline growth in 4QFY20. Moreover, its bottomline was buoyed by improved PBT margins which expanded by +14ppts. The improvement was largely due to higher commodity prices. It is worth noting that overall FFB production for the current quarter and year increased by +2.1% and +8.7% respectively due to the change in cropping pattern both in the Malaysian and Indonesian operations and larger areas attaining maturity in the Indonesian operations.

Source: MIDF Research - 29 Jun 2020