IJM Corporation Berhad - A Decent 1HFY24

Date: 
2023-12-01
Firm: 
TA
Stock: 
Price Target: 
2.01
Price Call: 
BUY
Last Price: 
2.19
Upside/Downside: 
-0.18 (8.22%)

Results Review

  • Stripping out the net allowance for the impairment of assets amounting to RM19.8mn and net unrealised foreign exchange gain of RM6.0mn, IJM’s 1HFY24 core profit of RM208.2mn came in above expectations, accounting for 60.5% and 58.2% of ours and consensus’ full-year estimates. The positive variance was mainly due to higher-than-expected profit contributions from the property and infrastructure segments.
  • The group declared a first interim dividend of 2.0sen/share, maintaining the same amount declared in the corresponding period last year.
  • YoY, 1HFY24 core profit surged 40.5% to RM208.2mn as revenue was 25.2% higher at RM2,684.2mn. The stronger earnings performance was mainly driven by higher profit contributions from all the business segments except for the construction arm. The core PBT for the property segment jumped by 82.1% to RM115.2mn from RM63.3mn a year earlier, thanks to higher revenue and better profit margin derived from on-going property development projects and industrial land sale.
  • Meanwhile, the infrastructure segment managed return to the black by posting a PBT of RM102.2mn as compared to an LBT of RM13.9mn a year earlier. The turnaround was mainly driven by higher profit contribution from the port business and the absence of the high maintenance costs incurred by the toll operations in previous year. On the other hand, the PBT for the construction segment fell by 39.6% to RM26.5mn from RM43.9mn a year earlier, as some projects were hit by higher construction materials cost.
  • QoQ, 2QFY24 core profit jumped 108.6% to RM140.7mn, while revenue was 19.0% higher at RM1,458.4mn. The stronger earnings performance was mainly due to higher revenue across all the business segments. Briefing Highlights:
  • The group is targeting for RM4.0bn new job win for FY24. YTD, the group has secured about RM2.8bn of new job. Management revealed that the group is in midst of forming a consortium to work on the concept proposals for the Kuala Lumpur-Singapore High Speed Rail project. Meanwhile, the group is also exploring job opportunities in East Malaysia and foreign countries such as India and Indonesia.
  • For the property division, the group maintains its property sales target of RM2.0bn for FY24. As of 1HFY24, the group managed to hit RM851.0mn of new sales. The group intends to launch some property projects with a combined estimated GDV of RM3.0bn.
  • Pertaining to the proposed transaction to acquire a 44.8% stake in PESTECH, management guided that the group still needs additional time to fulfil the conditions precedent stipulated in the Subscription Agreement. The deal is expected to be completed by February 2024.

Impact

  • Given the stronger-than-expected results, we raise FY24/FY25/FY26 earnings forecasts by 6.6%/4.5%/4.4%, respectively, after factoring in higher properties sales and higher cargo throughput at Kuantan Port.

Outlook

  • The group’s current outstanding construction order book is around RM6.4bn, translating to about 6.0xFY22 construction revenue. Meanwhile, the property division is supported by unbilled sales of RM2.5bn.

Valuation

  • In view of better earnings visibility and stronger outstanding order book, we raise the target P/B ratio from 0.65x to 0.7x. Together with the earnings revision, we raise the target price from RM1.85 to RM2.01, based on 0.7x CY24 P/B. Upgrade the stock from Sell to Buy.

Source: TA Research - 1 Dec 2023

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