IJM bags RM450.9 million office tower contract via subsidiary

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KUCHING: IJM Corporation Bhd (IJM) has bagged an RM450.9 million office tower contract via its wholly-owned subsidiary – IJM Construction Sdn Bhd (IJM Construction).

In a Bursa announcement on Monday, IJM Construction had on July 14 accepted a letter of award from UOB Properties (KL) Bhd for the design, construction and completion of UOB Tower 2 at Jalan Raja Laut, Kuala Lumpur with a completion period of 40 months.

“The project includes five levels of basement car park, one level of lower ground floor, two levels of podium for a banking hall and 27 levels of office space including a green lounge reception, a sky lounge and mechanical floors,” it said in the announcement.

This contract marks IJM’s first win for FY18 (FY Mar 2018) and boosts its year to date (YTD) wins to RM793 million and its outstanding construction order book to a historical high of RM9.4 billion – giving the group more than 3 fold cover on their FY17 construction revenue.

Additionally, the research arm of Public Investment Bank Bhd (PublicInvest Research) notes that project has an expected profit before tax margin of 8 per cent and is estimated to yield circa RM27 million in net profit over the construction period.

Despite the welcoming news, analysts across the board were neutral on the win as they felt it was well within IJM’s management’s expectation of a construction order-book replenishment target of RM3.0 billion in FY18.

In a company update by the team over at Hong Leong Investment Bank Bhd (HLIB Research), it was reported that IJM’s management is bullish on its construction prospects moving forward.

“It (IJM) sees ample opportunity within the infra space and is eager to participate in mega projects such as LRT3 worth RM9.0 billion, Pan Borneo Sabah worth RM13 billion and East Coast Rail (ECRL) worth RM55 billion.

“There are also job potential from its related entities such as the New Deepwater Terminal Phase 2 (NDWT) worth RM1 billion and The Light Phase 2 worth RM1.5 to 2 billion.

“Additionally, the industries segment should also benefit from these construction jobs via higher demand for spun piles, especially from the ECRL and NDWT,” shared HLIB Research.

With that said, HLIB Research who has a conservative construction orderbook replenishment target of RM1.0 billion for IJM, affirms its ‘buy’ call on the stock with an unchanged sum-of-parts (SOP) based target price of RM4.13 – implying a FY18-19 price earnings ratio of 23.1 and 20.5 fold respectively.

Meanwhile, PublicInvest Research who has an construction orderbook target akin to IJM’s own management is maintaining its ‘neutral’ recommendation with a SOP derived TP of RM3.40.