ECM Libra: ‘Hold’ call on IJM Corp

Another road works job for IJM

Secures RM246.7 million road works jobs

IJM announced yesterday (April 14) that it received two letters of acceptance of tender from the Works Department of Sarawak for the construction of two packages of access roads to the Murum Dam for a total contract sum of RM246.7 million. The construction period for both packages is 24 months.

Outstanding orderbook at RM3.8 billion

This is the second successive road works job secured by IJM following the award of the Besraya Highway extension job (RM600 million) last month. It also represents IJM’s first for FY2011, which boosts its outstanding construction orderbook to RM3.8 billion. As we have already factored in RM2 billion contract replenishment for FY2011, no revision to earnings estimates is necessary at this juncture.

Valuation not compelling

Although the transaction is positive for IJM, its valuation is not compelling at current level as it is trading at forward P/E of 18.4x. We also deem most positives already priced in at current level. As such, we maintain our HOLD call. Our target price is raised to RM4.77 (previously RM4.30) as we rollover to FY11 by continuing to peg a 18x PE target (1x standard deviation).

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