On the Dot

IJM Corp reported a lower core net profit in 3QFY23 at RM88.2m QoQ, albeit chalking a 30% improvement YoY due to softer performance across all divisions except for its property arm. The industry and infrastructure divisions’ QoQ earnings growth recorded a flattish 0.4% and 4.6% growth respectively, owing to higher cost of raw materials and lower toll revenue. Performance of its core division, construction, dropped 22.8% QoQ growth due to higher cost coupled with slower progress billings from its new projects. Cumulative YTD construction new wins amounted to RM3.6bn, representing 84% of our FY24 target orderbook of RM4.3bn. The property division achieved 70% (RM1.4bn including land sale of RM229m) out of its FY24 internal target of RM2bn. Nevertheless, cumulative 9MFY24 core net profit is in-line with ours and street estimates, accounting for 74% and 79% respectively. We opine that we will continue to see earnings improvements arising out of its non-core divisions, mainly from the opening WCE highway (Section 11) by 1Q2024 coupled with robust demand for its industrial products and Kuantan port throughputs on the back of construction activities’ resumption. Hence, we maintain our Outperform rating on IJM with an unchanged SOP TP of RM2.46, pegged at 15x PER sector average.

• Topline growth flattish QoQ at 1.2% dragged by industry and infrastructure divisions, recording a decline of 7.1 and 0.9% QoQ respectively due to lower deliveries of piles and lower toll revenue. Performance is overall led by property division which enhanced 8.1% QoQ as on-going developments achieved higher level of work progress resulting in higher billings during the quarter. On the other hand, construction revenue rose 2.7% QoQ attributed to slower progress billings.

• Prospects. IJM’s existing unbilled construction orderbook stood at RM6.6bn, providing 2-3 years earnings visibility. Cumulative YTD new wins amounted to RM3.6bn, representing 84% of our FY24 target orderbook of RM4.3bn. The property division achieved 70% (RM1.4bn including land sale of RM229m) out of its FY24 internal target of RM2bn. Nonetheless, we continue to see earnings improvements arising out of its non-core divisions and expect more, mainly from the opening WCE highway (Section 11) by 1Q2024 coupled with robust demand for its industrial products and Kuantan port throughputs on the back of construction activities’ resumption.

Source: PublicInvest Research - 29 Feb 2024