IJM (3336) : IJM Corp Bhd - Construction piles up numbers
Target RM7.95 (Stock Rating: ADD)
IJM Corp's annualised 1H15 core net profit made up 85% of our full-year forecast and 80% of consensus. The results were in line as we expect 2H15 to be stronger even after the normalisation of construction margins, which drove up 1H15's numbers. The property outlook is fairly resilient, backed by good take-up rates for landed units and townships. The order book is set to almost triple to an all-time high of over RM6bn thanks to WCE and Kuantan Port expansion. There is margin support from the impact of lower oil and steel prices. We maintain our EPS forecasts but raise our target price as we roll over to end-2015, still pegged to a 10% RNAV discount. Medium term catalysts are job wins and completion of the privatisation of IJM Land. Maintain Add.
1H15 broadly in-line
Annualised 1H15 core net profit made up 85% of our full-year forecast and 80% of consensus. It was broadly in-line as 2H15 should be better, even after the normalisation of construction margins. In spite of depleting jobs, 1H15’s construction pretax profit surged 152% due to final certification of works for Grand Hyatt and Besraya extension. 1H15’s construction pretax margin of 19% should normalise to 8-9% which has support from lower input prices. The 4 sen interim single-tier DPS was in line.
Construction order book to more than triple
The main positive from the results briefing was that the finalisation of the supplementary concession agreement of the West Coast Expressway (WCE) in the short-term should translate to RM2.8bn of new orders for IJM Corp, while the RM1.1bn Kuantan Port extension job is expected to be awarded before year-end. IJM Corp would more than triple its order book to over RM6bn, which has more upside with potential RM400m-500m worth of building works also before end-2014. Major construction works for the WCE and K-Port will begin next year. The group is also looking at new infra works such as the LRT 3.
Medium-term catalysts are in sight
We expect the stock to rerate on several key catalysts. Positive newsflow on order book growth is backed by the completion of the privatisation of IJM Land in 1Q15. The group's incoming township property launches should be relatively more resilient and support its RM2bn property sales target in FY15.
Source: CIMB Daybreak - 26 November 2014
Target RM7.95 (Stock Rating: ADD)
IJM Corp's annualised 1H15 core net profit made up 85% of our full-year forecast and 80% of consensus. The results were in line as we expect 2H15 to be stronger even after the normalisation of construction margins, which drove up 1H15's numbers. The property outlook is fairly resilient, backed by good take-up rates for landed units and townships. The order book is set to almost triple to an all-time high of over RM6bn thanks to WCE and Kuantan Port expansion. There is margin support from the impact of lower oil and steel prices. We maintain our EPS forecasts but raise our target price as we roll over to end-2015, still pegged to a 10% RNAV discount. Medium term catalysts are job wins and completion of the privatisation of IJM Land. Maintain Add.
1H15 broadly in-line
Annualised 1H15 core net profit made up 85% of our full-year forecast and 80% of consensus. It was broadly in-line as 2H15 should be better, even after the normalisation of construction margins. In spite of depleting jobs, 1H15’s construction pretax profit surged 152% due to final certification of works for Grand Hyatt and Besraya extension. 1H15’s construction pretax margin of 19% should normalise to 8-9% which has support from lower input prices. The 4 sen interim single-tier DPS was in line.
Construction order book to more than triple
The main positive from the results briefing was that the finalisation of the supplementary concession agreement of the West Coast Expressway (WCE) in the short-term should translate to RM2.8bn of new orders for IJM Corp, while the RM1.1bn Kuantan Port extension job is expected to be awarded before year-end. IJM Corp would more than triple its order book to over RM6bn, which has more upside with potential RM400m-500m worth of building works also before end-2014. Major construction works for the WCE and K-Port will begin next year. The group is also looking at new infra works such as the LRT 3.
Medium-term catalysts are in sight
We expect the stock to rerate on several key catalysts. Positive newsflow on order book growth is backed by the completion of the privatisation of IJM Land in 1Q15. The group's incoming township property launches should be relatively more resilient and support its RM2bn property sales target in FY15.
Source: CIMB Daybreak - 26 November 2014
