KUALA LUMPUR (May 31): Shares in IJM Corp Bhd fell as much as 10.87% or 20 sen to RM1.64 – its lowest level since June 2009 – after the Pakatan Harapan government said it is scrapping the third mass rapid transit line (MRT3) project, estimated to cost up to RM40 billion, in a bid to control the country’s debt, and the construction player turned in a 95.3% lower net profit for the quarter ended March 31, 2018 (4QFY18) yesterday.

In March, IJM Corp bagged a contract for the underground package of the Light Rail Transit Line 3 (LRT3) worth RM1.12 billion, its first construction contract win for 2018.

IJM had then said Prasarana Malaysia Bhd awarded the contract to its wholly-owned subsidiary, IJM Construction Sdn Bhd.

As at 11.09 am, the stock was still down in active trade, with a total of 9.66 million shares done for a market capitalisation of RM6.16 billion. This translates into a year-to-date decline of 46% so far, from its closing of RM3.05 on Dec 29, 2017.

Yesterday, IJM said net profit in 4QFY18 was slashed by 95.3% to RM11.19 million, from RM236 million a year ago, hit by lower contribution from all five of its main segments and a lower net unrealised foreign exchange gain.

Quarterly revenue came in at RM1.40 billion in the quarter under review, representing a 16.2% decrease from RM1.67 billion a year ago, due to lower contribution by its property, manufacturing and quarrying, and plantations divisions.

According to the filing, IJM’s property development segment showed the largest decline in profitability at 88.9%, impacted mainly by the unrealised foreign exchange loss in the quarter and a 44% drop in revenue.

The decrease in revenue was due to the recognition of RM123.1 million from the sale of a 32-acre land within Light Waterfront Penang (Phase 2) in the year-ago quarter, it said.

Its construction business segment, meanwhile, registered a 6.8% fall in pre-tax profit, due to lower contribution from joint ventures and associates.

For the full year (FY18), net profit nearly halved to RM349.81 million, from RM653.77 million one year ago. Revenue showed a marginal decrease to RM6.03 billion, from RM6.07 billion in FY17.

In the coming financial year, IJM said it expects to show “reasonable performance”.

Kenanga research wrote today it maintains an outperform call on the stock with a reduced target price of RM2.30, from RM3.35 previously.

“Despite the uninspiring outlook on the construction sector due to several scrapped mega projects, coupled with the downgrade in earnings and widening of discounts, we reiterate our outperform call on IJM as it is backed by a robust outstanding order book and unbilled sales,” wrote the research house in a note. — theedgemarkets.com

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