IJM: Mixed Quarterly Performance, Strong Order Book Underpins Positive Outlook, Rating Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM3.46 (+16.1%) |
| Last Traded | RM2.98 |
| Recommendation |
A prominent construction and property conglomerate reported adjusted core earnings of RM88.2 million for the first quarter of FY26, after excluding a one-off gain. This performance was largely in line with TA Securities’ and consensus full-year projections, accounting for 17.2% and 16.0% respectively. The investment bank anticipates a boost in earnings from the property segment during the second half of FY26.
Performance Review
Despite a robust 23.4% year-on-year increase in topline revenue, core net profit contracted by 9.8%. This softer performance was primarily attributed to the property division, which experienced slower progress billings and muted sales momentum. Additionally, concession assets contributed less, impacted by lower cargo throughput and traffic volumes.
Quarter-on-quarter, revenue saw a modest 3.2% decline. Profitability, however, was more significantly affected by escalating operating expenses and rising input costs, which compressed margins and led to a sharp 49.5% reduction in adjusted net profit for the quarter.
Future Outlook and Project Pipeline
The company’s future outlook remains optimistic, underpinned by a substantial and growing project pipeline. Year-to-date, it has secured new jobs totaling RM2.9 billion, bolstering its outstanding construction order book to RM12.9 billion, equivalent to 5.0 times its FY25 construction revenue. The property division also maintains resilience, supported by unbilled sales of RM1.7 billion.
A key development is the signing of the Supplemental Concession Agreement (SCA) for the New Pantai Highway Extension (NPE2). This agreement formalises the 15km NPE extension, which includes an extension to the existing concession period, and outlines plans for a toll restructuring upon the expiry of the current concession, along with the construction of a new Syed Putra Toll Plaza.
Construction for the NPE2 extension is slated to commence by the end of 4QCY25, with completion targeted within 48 months. The RM1.4 billion project, structured as a Public-Private Partnership (PPP) scheme with financing from two local institutions, is expected to contribute approximately RM63 million in profit to the construction segment, based on an estimated net margin of 4.5%.
Valuation and Recommendation
TA Securities has reiterated its earnings forecasts for FY26-28F and maintained its “Buy” recommendation on the stock, with an unchanged target price of RM3.46. This target price is pegged to 1.1 times CY26 Price-to-Book, incorporating a 3% ESG premium for the company’s strong 4-star ESG rating.
The investment bank continues to favor the company for its strong positioning as a contender for large-scale infrastructure works, such as the Penang LRT and Nusantara civil servant housing, and its expanding foothold in the high-growth data centre segment.
