A Buy for IJM Corporation after securing two significant contracts worth RM962.3 million

IJM Corporation Berhad (IJM) has secured two significant construction projects in Malaysia, totaling RM962.3 million. These projects include a logistics hub in Shah Alam and a semiconductor manufacturing facility in Penang.

This achievement boosts IJM’s outstanding order book to RM6.96 billion and aligns with its FY25 replenishment target of RM5.0 billion. As a result, the target price for IJM’s stock has been revised upwards to RM3.89 from RM3.01, maintaining a “BUY” recommendation.

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IJM Corporation contracts

Key Highlights

Project Details:

• Shah Alam Logistics Hub: Valued at RM584.3 million, this project involves constructing a six-storey warehouse with offices and additional facilities. It began in June 2024 and is expected to complete in 28 months by October 2026.
• Penang Semiconductor Facility: This RM378.0 million project includes building a four-storey production facility, a central utilities building, a warehouse, a substation, and a link bridge. Construction started in May 2024 and is expected to finish in 17 months by October 2025. The use of IJM’s Smart IBS solution aims to expedite progress.

Order Book and Future Prospects:

• IJM’s outstanding order book now stands at RM6.96 billion, covering 19.2% of its FY25 replenishment target.
• Potential future projects include the Penang LRT, the Sarawak Autonomous Rapid Transit Blue Line, the Sabah-Sarawak Link Road, and industrial buildings, among others.

Financial Performance:

• The financial projections for FY25 and FY26 remain unchanged.
• Expected revenues are RM6,868.5 million for FY25 and RM7,212.0 million for FY26, with operating profits of RM1,476.7 million and RM1,565.0 million, respectively.

Revised Target Price and Recommendation:

• The target price has been revised to RM3.89 from RM3.01, based on FY26 forecasted earnings and a forward price-to-earnings ratio of 22x.
• IJM’s share price as of June 21, 2024, was RM3.00, with an anticipated total return of 31.8%, including a 2.1% dividend yield.

Analysis

The recent project wins underscore IJM’s robust position in the Malaysian construction sector, particularly in high-value projects like logistics hubs and semiconductor facilities. The focus on advanced construction methods, such as the Smart IBS solution, indicates IJM’s commitment to efficiency and innovation.

The revision of the target price reflects confidence in IJM’s ability to secure and execute substantial projects, maintaining its growth trajectory. The steady order book and diverse project pipeline highlight a positive outlook, supported by both public infrastructure and private sector investments.

IJM Corporation – Investment Perspective

With a maintained “BUY” recommendation, IJM presents a compelling investment opportunity. The strong pipeline of potential projects and strategic wins in significant sectors like logistics and semiconductor manufacturing bolster its market position. The projected financial growth and improved target price suggest substantial upside potential for investors, driven by consistent performance and sectoral demand.

IJM Corporation is well-positioned for continued growth, supported by recent project acquisitions and a robust order book. The revised target price and maintained “BUY” recommendation reflect positive market sentiment and anticipated returns. Investors can expect solid performance driven by strategic project execution and sectoral opportunities.