IJM Corp is disposing its Swarna Tollway in India for MYR596.8m, which would result in gains of MYR92.6m, or 5.2 sen/share. We maintain our earnings forecasts, BUY call and MYR7.84 TP (11% upside). IJM Corp’s earnings are underpinned by a record construction order backlog. Prime locations of its new property launches should prevent a steep fall in sales despite headwinds in the property sector.

Selling Indian toll road. IJM Corp is disposing of a 70% stake in Swarna Tollway – a build-operate-transfer (BOT) concessionaire for two tolled highways in India’s Andhra Pradesh State – to MAIF Investment India 3 Pte Ltd for INR6.9bn (MYR407.8m). The company is likely to realise gains of MYR92.6m, or 5.2 sen/share. It is also disposing of the remaining 30% in Swarna Tollway – held via a 95%-owned subsidiary –to the same buyer for INR3.2bn (MYR189m), subject to approvals from the authorities.

Unlocking value. We are positive on the latest news, which is consistent with IJM Corp’s strategy of gradually unlocking value of its overseas investments as and when the assets attain maturity. Proceeds of MYR596.8m from the disposal would reduce the company’s net debt and gearing of MYR4.3bn and 0.51x as at 31 Mar to MYR3.7bn and 0.44xrespectively.

Forecasts. We maintain our earnings forecasts, which exclude one-off items.

Risks. i) new construction job wins in FY16F-18F falling short of our MYR2bn assumption, ii) delays and cost overruns arising from construction jobs, and iii) a sharp slowdown in the property market.

Maintain BUY. We like IJM Corp for its strong earnings visibility,underpinned by a record order backlog of MYR7bn. Meanwhile, prime locations of its new property launches (largely Penang I sland and the Klang Valley) should prevent a steep fall in sales despite the headwinds in the property sector. We keep our SOP-based TP of MYR7.84 (see Figure 1).