IJM lifts near-term order book target as UK projects turn around, Penang LRT and Nusantara jobs finalise — Kenanga

KUALA LUMPUR (July 21): IJM Corporation Bhd (KL:IJM) has recently raised its near-term order book replenishment target to RM9 billion, including RM6 billion domestic and RM3 billion overseas, Kenanga Research said in a note on Tuesday.

The target came in line with Kenanga’s baseline assumptions of RM5 billion per annum for Malaysia and RM3 billion per annum abroad for both the financial year ending March 31, 2027 (FY2027) and FY2028.

"The domestic pipeline is strongly backed by high-margin data centre packages and two semiconductor projects. 

"Key near-term catalysts include the finalisation of the Penang LRT Mutiara Line (Package 2) by mid-year, alongside the potential rollout of the more than RM1 billion Nusantara civil servant housing project in Indonesia by year end," the house said in a note, not long after a site visit at IJM's UK project recently.

In the UK, Kenanga noted that IJM has three major real estate projects planned, all being low-risk, high-occupancy assets that generate strong recurring income.

The three real estate projects are Finsbury Circus in the City of London, Royal Mint Gardens (Phase 2) and The Wheat Quarter in Welwyn Garden City.

"IJM's UK market strategy focuses heavily on driving capital into high-yield, supply-constrained sectors like City of London commercial offices (where new-build vacancies sit below 2%) and high-demand student and co-living housing, while strictly avoiding traditional residential developments unless they can be completely de-risked via forward-funding institutional sale," it said.

Kenanga said IJM’s recent acquisition of JRL Group is also bearing fruit, as JRL officially returned to a £2.9 million (RM15.93 billion) pre-tax profit from a previous £49 million loss, it said.

These earnings, paired with a robust £2 billion order book of "highly profitable" external contracts, put IJM on a solid footing to have its initial £50 million investment fully repaid by 2028, the house said.

Overall, Kenanga remains positive on IJM’s construction segment valuation as it maintained a sum-of-parts-based target price of RM3.40 and provided an “outperform” rating on the Malaysian construction giant. 

However, the research house also highlighted that the potential risks include IJM’s sustained weak construction job flow, rising building material costs, project cost overrun and liabilities arising from liquidated ascertained damages.

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