Secures Two Contracts Worth RM962.3mn

IJM has been awarded two new contracts worth RM584.3mn and RM378.0mn from Strategic Sonata Sdn Bhd and Siliconware Precision Malaysia Sdn Bhd, respectively. The specific details of the contracts are as follows:

(i) The first project, totaling RM584.3mn, involves the construction of Plot A of a logistic hub at Section 15, Shah Alam. The project includes the construction and completion of six storey of ramp-up warehouses with offices, a two-storey cafeteria, and all associated ancillary structures and services. The contract duration is about 28 months, starting from the commencement date of 20 June 2024.

(ii) The second new job, worth RM378.0mn, involves the construction of Phase 1 of a semiconductor manufacturing facility for Siliconware Precision Malaysia Sdn Bhd at Bandar Cassia Technology Park, Penang. Siliconware Precision Malaysia is part of ASE Technology Holding Co. Ltd., the world's largest outsourced semiconductor assembly and test company. Phase 1 comprises the construction of a four-storey production building with an office, a four-storey centralised utilities building, a four-storey warehouse building, a 33 kV substation building, and a link bridge to support advanced semiconductor production. This project will commence in May 2024 and is slated to be completed by October 2025.

Our View

Following the maiden job wins secured in FY25, IJM’s total construction outstanding order book reached RM7.0bn, translating to 4.2x FY24 construction revenue.

Assuming a PBT margin of 8.0%, we expect this contract to generate total net earnings of RM58.5mn throughout the construction period.

Forecast

After performing housekeeping on our models, we revised our FY25 and FY26 earnings slightly lower by 1.5% and 0.9%, respectively.

Valuation

Considering IJM is a strong contender for securing more advanced technology facility construction jobs, which require a higher degree of complexity, we raise our target P/B multiple from 0.95x to 1.2x. This adjustment translates to an implied forward PER of 24x CY25 earnings. We believe this valuation is fair, given IJM’s capability to deliver complex, fast track projects, thus capitalising on the robust data centre industry and the growing semiconductor assembly and test field. Consequently, we raise our target price to RM3.59 from RM2.78 previously. Maintain Buy on the stock.

Source: TA Research - 24 Jun 2024