IJM Corp chalked a higher core net profit at RM205.7m (+39.4% YoY), attributed to strong performance of its property and infrastructure divisions. Both divisions reported >100% YoY improvement in earnings at pre-tax level on the back of healthier property sales margins, coupled with higher number of cargo throughputs and better ship revenue from increased tariff. Cumulative 6MFY24 core net profit is above ours and street estimates, accounting for 61.4% and 57.5% respectively. IJM’s YTD new wins represent 93.2% of our initial FY24 orderbook replenishment assumption of RM3bn. Hence, we revise our FY24 construction orderbook replenishment assumption to RM4.3bn (+43%) given the better than expected jobs replenishment. As such, we raise our FY24-26F earnings by +18% on average per annum adjustments made to our billings and margins. All said, we maintain our Outperform rating on IJM with a higher SOP TP of RM2.46 (from RM2.10 previously), pegged at 15x PER sector average.

• 1HFY24 revenue grew 25.2% YoY. Overall topline performance is led by its construction and property division mainly, though all divisions actually achieved double-digit growth YoY. Its construction revenue climbed 34.7% YoY on the back of higher works done, followed by property which recorded 24.1% YoY growth owing to higher property sales. YTD property sales is marked at 41.6% out of its RM2bn internal property sales target. That aside, revenue from the industry and infrastructure divisions also improved by 22.6% and 13.3% YoY respectively, supported by higher deliveries of industrial products i.e.: piles, quarries, ready mixed concrete, and cargo throughputs.

• 1HFY24 pre-tax profit up >100% YoY. The Group reported a higher pre-tax profit of RM371.1m in 1HFY24, supported by mainly performance from the property and infrastructure divisions. Pre-tax profit from both division surged >100% YoY due to healthier property sales margins, coupled with better ship earnings from the increased volume and tariff.

• Prospects. We noticed deterioration in construction earnings owing to high building materials cost. Active tenders within the construction division include New Pantai Expressway (NPE) extension worth c.RM1bn, the Nusantara state civil servant housing project worth c.RM1bn, in addition to Indian highways. Going into 2HFY24, we anticipate earnings to be buoyed by IJM’s non-core divisions – mainly its industry and infrastructure divisions. We believe industrial products would remain profitable even concrete prices have jumped >20% YoY with higher average selling prices. On the other hand, Kuantan port throughputs growth momentum is sustainable, on the back of China’s property stimulus measures.

Source: PublicInvest Research - 1 Dec 2023