• Keep BUY, with new MYR4.34 TP from MYR3.60, 23% upside and c.2% FY25F (Mar) yield. We remain positive on IJM Corp on its strengthening presence in industrial jobs, improving presence in Sarawak, potentially breaking ground in Indonesia and getting new highway jobs. Foreign shareholding level as of end May was 18.6% vs 14.8% in Dec 2023. News flow of the Kuala Lumpur-Singapore High Speed Rail should attract foreign investors as IJM is involved in one of the consortiums that submitted a concept proposal to MyHSR Corp in January.

• IJM’s outstanding orderbook currently stands at c.MYR7.3bn – vs the time when balance orders hovered at <MYR5bn from FY20-23 (Figure 1). In FY24, IJM witnessed an uptrend in its orderbook, especially after clinching the MYR1.1bn job for the immigration, customs and quarantine complex for the Rapid Transit System Link in Johor in Oct 2023. This coincided with IJM’s new job wins reaching MYR3.7bn – the highest in six years (Figure 2). Other key wins in FY24 and YTD-FY25 are industrial buildings like semiconductor facilities and warehouses (20-30% of orderbook).

• IJM has made inroads into Sarawak via its contract for Sarawak Metro’s Kuching Autonomous Rapid Transit (KART) project for the full works of the Rembus Depot via a JV with Azam Sehasrat and Unique Deco worth MYR260m in Dec 2023. We do not discount the possibility of IJM eyeing for the remaining packages of the KART such as the Blue Line Package 2 which had the tender submission deadline on 18 Jun. Moreover, its property arm, IJM Land inked an MoU with Sarawak Metro and Liang Court Wanisara for the construction of a new linkway to a station along the Blue Line – signifying the group’s persistence to gain a footprint in the state.

• Upcoming catalysts would be Sarawak and Indonesia (particularly the new capital, Nusantara) via a civil servant housing project worth c.MYR1bn (outcome likely known by end CY24). Locally, IJM has teamed up with Permodalan Negeri Selangor Berhad and Lim Seong Hai Capital (LSH MK, NR) to study viable connectivity routes focused in the Southern Selangor Integrated Regional Development area – which may give rise to new highway jobs.

• No changes to our earnings estimates, but we are ascribing a higher target 25x P/E (from 18.5x) to IJM’s construction arm. The target P/E for the construction arm is justified as industrial jobs were absent or minimal during the c.16x peak reached during the CY17 construction upcycle. Therefore, we derive a new TP of MYR4.34 (from MYR3.60), which ascribes a 2% ESG premium. Key earnings catalysts: Faster-than-expected job replenishment, especially from the industrial building segment such as data centres, warehouses and factories. Key downside risks include failure to secure contracts in a timely manner.

Source: RHB Research - 16 Jul 2024