• Stripping out the one-off gain totalling RM96.5mn, IJM’s FY24 core net profit of RM503.8mn came in above our and consensus’ expectations, accounting for 128.7% and 130.0% of ours and the street’s full-year estimates, respectively. The positive variance was mainly driven by the higher-thanexpected contributions from non-core business divisions, namely the industry and infrastructure divisions.

• The group declared a second interim dividend of 5.0sen/share and a special dividend of 1.0sen/share (4QFY23:- second interim dividend: 4.0sen/share, special dividend: 2.0sen/share), bringing the YTD dividend to 8.0sen/share (FY23: 8.0sen/share).

• YoY, FY24 revenue and core earnings registered strong growth of 29.4% and 48.4%, respectively. The strong earnings performance was primarily attributed to the following factors: - (i) strong sales and higher work progress achieved in the property division, (ii) increasing average selling price and sales volume for the pile business, and (iii) lower maintenance costs for tolls and higher cargo throughput for port concessions. Having said that, the construction division’s PBT declined by 59.5%, owing to the changes in job scope for its 3 existing projects amidst escalating raw material costs.

• QoQ, 4QFY24 core earnings more than doubled to RM200.4mn, driven by higher contributions from manufacturing & quarrying, toll and port, and others divisions, along with a lower effective tax rate.

Impact

• Following the stronger-than-expected results, we tweak our progress billing and margin assumptions for certain projects. As a result, our FY25/26F earnings forecasts are revised upward by 28.9%/30.8%, respectively. Meanwhile, we introduce our FY27F earnings estimate, representing an earnings growth of 12.5%.

Outlook

• The group’s current outstanding construction order book is around RM6.0bn, translating to about 3.6x FY24 construction revenue. Meanwhile, the property division is supported by unbilled sales of RM2.6bn. In FY24, IJM managed to secure RM3.7bn in new jobs against its RM4bn new order replenishment target. Going forward, IJM is targeting to bag RM5bn in new job wins for FY25, potentially fuelled by: (i) Nusantara civil servant housing job (project value: RM1bn), (ii) NPE road extension (project value: RM1bn), (iii) Rollout of large-scale infrastructure projects, specifically Penang LRT, Pan Borneo Sabah Phase 2 and a data centre job, totalling RM3bn in project value.

Valuation

• Considering IJM is one of the front-runners for large-scale infrastructure projects, i.e. Penang LRT, Nusantara civil servant housing project as well as Pan Borneo Sabah Phase 2, while also pursuing opportunities in the growing data centre industry, we raise the target P/B multiple from 0.85x to 0.95x, translating to an implied PER of 19x CY25 earnings in view of better earnings visibility backed by a solid outstanding order book.

• Consequently, we arrive at a higher target price of RM2.78 from RM2.50. Maintain Buy on the stock.

Source: TA Research - 30 May 2024