IJM: Official award for Besraya Elevated Expressway

THE BUZZ

Last Friday it was announced on Bursa Malaysia that IJM had accepted the Letter of Award for the construction of the Besraya Elevated Expressway (BEE) for a fixed price lump sum of RM600 million. Construction period for the job is 36 months.

OUR TAKE

Award was expected. This award does not come in as a surprise given that IJM had already received a letter from the Ministry of Works last month (February) stating of the intention to extend the Sg Besi Highway. The contract value of RM600 million was however slightly lower than the

previous guidance of RM649 (-7.6%).

Project on BOT basis. Based on management’s previous guidance, the BEE will be implemented on a Build-Operate and Transfer (BOT) basis. The RM600 million construction cost of the BEE will be fully borne by IJM. Following the BEE’s completion, a toll plaza will be placed there, enabling IJM to collect toll revenues.

Highway details. BEE is essentially an extension of the Sg Besi Highway by 12.3km. The extended portion will be an elevated highway commencing at the previously abolished Salak Jaya toll and will connect to Jalan Istana and the Middle Ring Road 2 (MRR2). We understand that preliminary works on site have begun.

Maintain NEUTRAL. We have previously factored in the BEE into our FY11-12 earnings projections. We now adjust down our FY11-12 earnings by an insignificant 0.2% to account for the slightly lower than expected project value. Our Sum of Parts (SOP) based TP of RM4.70 is unchanged, implying CY10 PER of 16.8x. In our view, valuations do not appear

compelling as large-cap contractors are trading at 14.5x CY10 earnings. Maintain NEUTRAL.