IJM Corp (OSK Research) maintain neutral; target price RM6.60

IJM Corporation
On a Winning Spree

Last Friday, IJM announced that it had won a RM461m contract for Phase 3 of the Platinum Park development by Naza TTDI. Its job wins so far into FY11, totaling RM1.84bn, have beaten our RM1.5bn target. Potential jobs in the pipeline include high-rise buildings in KL, Kelau Dam, West Coast Expressway and LRT packages.

We keep our FY11 earnings unchanged but raise the numbers for FY12-13 by 1%-6%.

Maintain NEUTRAL call on IJM given the limited 5.2% upside.

Lands yet another job. Last Friday, IJM announced on Bursa that it had won a RM460.6m job for Phase 3 of the Platinum Park in Jalan Stonor, Kuala Lumpur. The job scope for
Platinum Park, a commercial development by Naza TTDI SB, involves 2 office tower blocks, podium car parks and basement car parks. The entire job is scheduled for
completion by Dec 2013 and should feed into IJM’s FY11-14 earnings.

Job wins surpass target. We estimate IJM’s job wins so far into FY11 (March) to amount to RM1.84bn. This sum assumes that a portion of the RM690m National Cancer Institute
will be awarded by the 60:40 Kiara-IJM JV back to IJM. As its orderbook replenishment for FY11 has surpassed our FY11 target of RM1.5bn, we are raising our FY11-13 assumption
to RM2bn. Management had guided for RM2bn for CY10, which has been exceeded at RM2.49bn.

Set to score more wins. Given IJM’s track record in high rise buildings in the city centre, we believe it stands a chance of participating in the 100-storey Warisan Merdeka tower,
which is itself expected to cost RM2.5bn-RM3bn.

Apart from that, we also see potential for IJM in the Kelau Dam (RM200-250m), for which the tenders closed a few months ago and we expect the outcome to be known early next year. The West Coast Expressway (RM3bn mentioned in Budget 2011, is another likely contract that could benefit IJM. We also see IJM getting some subcontract packages in the LRT Package A and potentially some main contracting works for Package B later on.

TP higher, but still a NEUTRAL. Although its FY11 job wins have exceeded our expectations, much of the impact would only be felt from FY12 onwards as the jobs were
mostly secured in 2H. As such, we keep our FY11 earnings unchanged but raise that for FY12-13 by 1.5% and 5.2% respectively.

For our Sum of Parts based valuation, we roll over our construction and industries earnings from FY11 (March) to CY11 (Dec). These adjustments bump up our TP to RM6.60 from RM6.31. Maintain NEUTRAL on IJM given the 5.2% upside. Details on the IJM Land (NR)–MRCB (NEUTRAL, TP: RM2.30 are expected to be announced in the last week of December.