KUALA LUMPUR: IJM Corporation Bhd’s nine-month results were above expectations as core net profit grew by 1.2% on-year but the overall group saw mixed performances except the plantations sector, CGS-CIMB Equities Research said.
“Reactivation of mega contracts to bode well for large cap contractors. Add retained with higher TP; contract wins — East Coast Rail Link (ECRL), Private Finance Initiative (PFI) projects and MRT3) are key catalysts, ” it said on Friday.
CGS-CIMB Research raised the FY22-23F EPS/DPS to reflect FY21’s operating performance and assume earnings before interest, tax, depreciation and amortisation (EBITDA) margins of 10%-11% (8%-10% previously).
It said IJM group’s new order book target of RM2bil is intact with potential success coming from the
ECRL (up to RM1bil worth of targeted scope), MRT 3 (tenders open in August) and PFI projects.
“Retain Add rating as we expect larger contractors to emerge as major beneficiaries of the reactivation of mega projects. TP is raised to RM2.03 on 20% RNAV discount (30% previously). Key downside risks: delays in tender/contract rollouts and weaker earnings, ” it said.
In its analysis of IJM Corp’s nine-month results, it said the reported net profit of RM432mil included RM85.2mil gain on disposal of investment properties and RM82.4mil forex gains for the plantation division.
“Stripping these and other one-off items out, estimated core net profit of RM335mil exceeded our
and consensus full-year forecasts by 28%-40%. The key deviation was strong plantation earnings due to higher CPO prices, higher core EBITDA margin of 22% vs. our forecast of 8.9% and lower tax rates, ” it said.
CGS-CIMB Research said the FY21 revenue contracted 14.9% yoy due to the impact of various Movement Control Orders (MCOs) on construction and property billings and toll revenue. 4QFY21 revenue fell by a steeper 22% yoy due to the completion of an overseas property venture in 4Q20 and weaker billings.
“Overall, FY21 core net profit grew 1.2% yoy, dragged by higher associate losses (+14.3% yoy) due to a subdued construction landscape in Singapore as a result of the pandemic. FY21 DPS of six sen (FY20: three sen) was higher than our full-year forecast of three sen, ” it said.
The group achieved RM1.7bil property sales in FY21,21% higher than FY20’s RM1.4bil despite Covid-19 due to optimisation of its sales strategy.
At end-FY21, construction order book stood at RM4bil (RM1.5bil total contract wins in FY21).
