IJM Corp's construction, plantation earnings to mitigate property slowdown

KUALA LUMPUR (Apr 3): IJM Corp Bhd's construction and plantation units are expected to cushion the impact of a potential slowdown in property sales, according to RAM Rating Services Bhd.

In a note today, RAM co-head for infrastructure and utilities Davinder Kaur Gill said IJM Corp's (fundamental: 1.1; valuation: 1.2) property sales might have to contend with a slower Malaysian real estate market.

“While we do not preclude near-term softening in IJM’s property sales and the relevant division’s earnings amid the decelerating local property market, upside in construction earnings and the group’s gradually improving plantation operations should help cushion any potential weakening.

"Supported by RM1.6 billion of unbilled property sales and a record-high order book of over RM6 billion, IJM’s earnings prospects appear bright. The Group was recently awarded RM2.8 billion of jobs under the long-awaited RM5 billion WCE project, RM1.2 billion of Kuantan Port upgrading works and several private jobs valued at around RM1.8 billion," Davinder said.

RAM has reaffirmed its ratings for IJM Corp's Islamic bond. Davinder said RAM's AA3 rating of IJM Corp's RM3 billion sukuk programme came with a stable outlook.

According to her, the rating takes into account IJM Corp's diversified business dynamics and strong financials.

"The group’s rating reflects its diversified business and resilient performance as well as healthy balance sheet, complemented by the strong financial flexibility afforded by its sizeable land bank.

"IJM has to date obtained all the necessary approvals in relation to the privatisation of IJM Land Berhad. As the purchase consideration will be mainly funded by a share swap, it is not expected to weigh on the group’s financials," Davinder said.

At 3:13pm, IJM Corp shares were traded flat at RM7.13 for a market capitalisation of RM10.69 billion.

A total of 155,600 shares changed hands.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)