RHB Research said the latest wins are a testament to IJM’s ability in building industrial infrastructure.
PETALING JAYA: IJM Corp Bhd
looks set to expand its presence in the industrial-property segment amid the rising number of industrial projects.
This comes as the construction and property group secured two contracts with a combined value of RM561mil for the construction of data centres in Johor and an industrial manufacturing facility in Penang.
RHB Research said the latest wins are a testament to IJM’s ability in building industrial infrastructure.
The first contract is for constructing two data-centre buildings for an international data centre developer in Gelang Patah, Johor, worth RM254mil with an effective 50% share in a joint-venture with Woh Hup Malaysia Sdn Bhd.
The second contract worth RM307mil is for the construction of a new electrical and electronics (E&E) warehousing and manufacturing facility for a US-based company in Batu Kawan, Penang.
According to RHB Research, the two jobs are expected to reap pre-tax margins of 6% to 8% and will bring the group’s financial year 2025 (FY25) job wins to RM1.9bil year-to-date versus the FY25 target of RM5bil.
“IJM’s outstanding construction order book now stands at about RM7.9bil, translating into an order book-to-revenue cover ratio of 3.8 times. On further scrutiny, we estimate that around 25% to 30% of IJM’s order book comes from industrial jobs.
“The group stands to be the contractor with the highest number of industrial job wins (excluding data centres) in the past 12 months compared with other large-cap contractors,” the research house said in a report yesterday.
However, RHB Research said it was not making changes to its earnings estimates as the latest wins are within its FY25 job-replenishment target of RM5bil for IJM.
The research house said growth in the country’s industrial-properties space will be driven by semiconductor facilities and warehouses, backed by a 13% year-on-year jump in approved investments reaching RM83.7bil in the first quarter of 2024, with about half being foreign investments.
Other potential jobs wins for IJM in FY25 may come from a civil-servant housing project in Indonesia’s new capital Nusantara and the New Pantai Expressway extension, said RHB Research, which has a “buy” on the stock with a target price of RM4.34.
Meanwhile, UOB Kay Hian Research (UOBKH Research) upgraded its recommendation to “buy” to reflect the group’s growth prospects.
With IJM’s proposed acquisition of a 44.83% stake in Pestech International Bhd aborted, the research firm believed that IJM may be shifting priorities to the industrial property and semiconductor sectors in the near term.
“So far, its contract wins in FY25 have spanned a logistics hub, two data centre contracts and two semiconductor-related E&E plants.
“While larger infrastructure projects still represent significant catalysts, we believe IJM may be looking at jobs similar to its year-to-date wins in the immediate future.”
Assuming a conservative earnings before interest, taxes, depreciation and amortisation margin of 10%, UOBKH Research said the new projects are expected to contribute RM56mil in operating profit in three years.
The recognitions should come in from the second quarter of FY25 (2Q25), with major milestones expected around 3Q to 4Q of FY25, after completion of structural works.
The research house raised its target price for the stock to RM3.65 from RM2.76 previously.
This implies a 2025 price-earnings ratio of 28.5 times, roughly two standard deviations above its five-year average. The research house said this is justified given the plethora of catalysts on the horizon for the sector.
