Results Review

• Excluding the net allowance for the impairment of assets amounting to RM7.9mn and net unrealised foreign exchange gain of RM41.1mn, IJM’s 1QFY24 core profit of RM67.5mn came in at 19.6% and 19.1% of ours and consensus’ full-year estimate, respectively. We deem the results to be within expectation as we expect the group to deliver stronger earnings performance in the upcoming quarters once new projects expedite the construction progress.

• YoY, 1QFY24 core profit fell 11.8% to RM67.5mn, despite revenue was 14.3% higher at RM1,225.8mn. The weaker bottom line was largely dragged by the construction division. The PBT for the construction division dropped by 42.6% to RM11.2mn from RM19.5mn a year earlier, as some on-going projects were hit by higher construction materials prices.

• On the other hand, the industry division saw its core PBT increase 41.7% YoY to RM44.4mn from RM31.3mn a year earlier, thanks to higher deliveries of piles, quarry, and ready-mixed concrete as well as higher margins for its piles business.

• QoQ, 1QFY24 core profit dropped 40.2% to RM67.5mn, while revenue was 7.6% lower at RM1,225.8mn. The softer earnings performance was mainly attributed to lower profit contribution from both construction and property divisions.

Impact

• Maintain our FY24 to FY26 earnings forecasts

Outlook

• As of end-June 2023, the group’s outstanding construction order book stood at RM4.9bn, translating to about 4.6xFY23 construction revenue. Meanwhile, the property division was supported by unbilled sales of RM2.5bn.

Valuation

• No change to our target price of RM1.85, based on unchanged 0.65x CY24 P/B. Downgrade the stock from Buy to Hold due to limited potential upside after the recent increase in share price.

Source: TA Research - 29 Aug 2023