News: IJM To Clinch Chunky Contracts For The Light Project Phase 2

Feb 6, 2020

AllianceDBS Research expects IJM Corp Bhd to win chunky contracts for Phase 2 of The Light Waterfront project in the first quarter of 2020.

“IJM Corp’s diversified and defensive nature, as well as a strong execution track record, make it an ideal large-cap infrastructure proxy. Moreover, its internal job pipeline focusing on more rail and hospital jobs locally, and its legacy in India, provide another avenue to grow its order book,” said AllianceDBS.

IJM is the biggest beneficiary of the East Coast Rail Link (ECRL), with three of its divisions benefitting from the project – namely, construction, Kuantan Port and investment and land in the Malaysia-China Kuantan Industrial Park (MCKIP), and industry division.

Check this list of project reviews by IJM here!

The research house noted that IJM may be a strong beneficiary of the ECRL spur line to Kuantan Port. Since investments to the MCKIP have been encouraging, the Kuantan Port Phase 2 expansion may hasten.

“We believe IJM Corp’s strong management and execution track record is a big plus in a changing construction market. Its solid balance sheet allows it to fund and participate in larger-scale projects without raising equity. Surprisingly, its property division is also doing better than expected, having reduced inventory levels,” explained AllianceDBS.

AllianceDBS revealed that its assessment for IJM Corp is based on a sum-of-parts valuation considering its diversified business.

IJM’s construction business was valued based on a combination of price-earnings valuation methodologies and discounted cash flow (DCF), while its property and concession businesses were assessed using the DCF, it said.

However, one key risk involving IJM Corp is poorer earnings delivery.

“With its conglomerate structure, there is an earnings downside risk from other divisions such as property and industry,” added AllianceDBS.

Image source from The Edge Property 


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Valerie Lai
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