IJM Corporation Bhd securing a RM864.7 mil contract is a positive sign for the company, as it boosts IJM’s outstanding order book to about RM5 bil, says an analyst.
“We are optimistic on the new contract awarded as it bodes well with the group’s revenue and earnings moving forward. This is mainly premised on the group’s sizable outstanding order book with earnings visibility over the next 4 to 5 years.”
“We are now expecting a sequential recovery in earnings for the group’s 2QFY21 following the resumption of construction and business activities and increased workforce capacity at work sites during the Recovery movement control order (MCO) period,” said MIDF Research analyst Khoo Zhen Ye.
Khoo is also positive on the outlook of IJM’s order book, in that it remains intact with no major project cancellation in sight, along with possible further contract awards following the resumption of The Light City project in Penang.
The latest contract is from IJM Perennial Development Sdn Bhd, a 50:50 joint venture company between IJM and Perennial Penang Pte Ltd, an indirect wholly-owned subsidiary of Perennial Real Estate Holding Limited.
It is for the construction and development of an 11-storey retail mall and convention centre at The Light City, Penang, with expected completion dates of July 31, 2024 and Sept 30, 2024 respectively.
“While we are positive on the latest development, it has not come as a surprise to us,” said AmInvestment Bank analyst Joshua Ng.
Ng noted that, during an analyst briefing at the end of June, IJM had refrained from providing specific guidance on the target for new construction job wins in FY21F, but it did indicate that this project may come through “over the next few months.”
TA Securities analyst Ooi Beng Hooi noted that the job win comes within expectations, adding that this is IJM’s first construction job win in FY21, which boosts its outstanding order book to about RM5 bil.
“Assuming a net margin of 5%, we expect this project to generate net earnings of RM43.2 mil, or earnings per share of 1.2 sen throughout the construction period,” said Ooi.
MIDF maintains its buy call on IJM, with a lower target price of RM1.63 from a previous RM1.95. AmInvest maintains its underweight call, as well as its fair value of RM1.26. TA Securities upgrades IJM to a hold call with an unchanged target price of RM1.61.
At the end of the trading day, IJM’s shares were at RM1.53, up 8 sen, with 3.9 million shares traded. – Aug 12, 2020
