IJM Corp reported a lower headline net profit of RM86.9m (-13.7% YoY, -71.6% QoQ) for 1QFY25, mainly due to lower profit contribution from the property development and toll division, as well as the recognition of fair value loss on WCE Holdings Bhd warrants of RM19.9m in the current quarter, compared to a gain in the immediate preceding quarter. Excluding non-operating items, the Group’s estimated core net profit stood at RM107.7m (+62.2% YoY, -46.3% QoQ). The results were broadly within both our and consensus estimates, making up 19.1% and 20.3% of full year forecasts, respectively. We remain upbeat on IJM, as we believe that its earnings growth will be supported by positive outlook across all business divisions, especially the construction segment. We maintain our earnings forecast and our Outperform call on IJM with an unchanged TP of RM4.20.

• 1QFY25 revenue grew by 14.6% YoY to RM1.4bn, primarily due to higher contribution from construction and port segments. Revenue for the construction segment increased by 76.0% YoY to RM540.5m, driven by higher construction work activities. The port segment posted an increase of 23% YoY to RM125.3m due to the increased cargo throughput. However, this was partly offset by lower revenue in property development, manufacturing and toll segments. Property development’s revenue fell by 7.3% owing to lower level of work progress, while manufacturing revenue declined by 12.7% YoY due to lower deliveries of piles.

• 1QFY25 headline net profit fell by 13.7% YoY to RM86.9m, mainly due to the higher unrealised foreign exchange gain of RM41.7m recorded in 1QFY24, compared to unrealised foreign exchange losses of RM1.4m in 1QFY25. After excluding exceptional items, 1QFY25 core net profit increased by 62.2% YoY to RM107.7m, mainly attributed to higher earnings from construction and port segments. Construction’s profit before tax (PBT) doubled YoY to RM23.6m, in line with higher order book and increased construction work activities. PBT for port segment increased by 73.5% YoY to RM43.2m on the back of higher bulk cargo volume. This was partly offset by lower earnings contribution from property (-7.3% YoY), manufacturing (-12.7% YoY) and toll (-13.8% YoY) segments, which aligned with the decrease in revenue.

• Outlook. IJM will focus on the timely execution and completion of its outstanding construction orderbook of RM7.0bn, providing 2-3 years of earnings visibility. Cumulative YTD new wins amounted to RM1.9bn, representing 37.1% of its FY25 orderbook replenishment target of RM5.0bn. With the current orderbook in hand and the anticipation of further job wins underpinned by infrastructure spending and opportunities in data centre and industrial property sectors, the Group is well-position for an improved performance in FY25.

Source: PublicInvest Research - 29 Aug 2024