IJM: Investment Bank Maintains Outperform Call Amid Mixed Earnings and Target Price Adjustment

A recent research report from an investment bank highlights a challenging financial quarter for a major Malaysian conglomerate, with its headline net profit experiencing an 11.4% year-on-year decline to RM65.8 million for the second quarter of FY26. Core net profit also fell by 14.6% year-on-year to RM123.2 million. The group’s performance for the first half of FY26 reportedly missed both the bank’s and consensus estimates, achieving only 39.7% and 40.6% of full-year forecasts, respectively. This shortfall was primarily due to weaker performances in the property and port divisions, exacerbated by unrealized foreign exchange losses.

Divisional Performance Review

Despite the overall profit dip, the group’s 2QFY26 revenue saw a 10.4% year-on-year increase to RM1.67 billion, driven predominantly by robust contributions from its Construction and Manufacturing divisions. Construction revenue surged by 32.4% to RM825.1 million, fueled by heightened activities and a strong order book. Manufacturing revenue also grew by 16.2% to RM309.9 million, attributed to higher deliveries of piles and ready-mixed concrete, alongside improved operational efficiency.

However, these gains were partly offset by significant underperformance in the Property and Port segments. Property revenue declined by 18.7% year-on-year to RM329.3 million due to lower sales, leading to a substantial 76.5% plunge in Property Profit Before Tax (PBT). Similarly, the Port segment’s revenue decreased by 15.6% to RM103.0 million, with its PBT dropping 46.7% due to lower cargo throughput. In contrast, the Toll division’s revenue remained resilient at RM103.9 million and returned to profitability with a PBT of RM9.6 million, while Construction PBT rose 30.2% on strong order book execution.

Future Outlook and Investment Bank’s Stance

The group maintains a significant outstanding construction order book of RM14.4 billion, which, coupled with approximately RM1.59 billion in unbilled property sales, is expected to provide solid earnings visibility for the next two to three years. Year-to-date, the group has secured RM5.3 billion in new contracts, primarily in data centers and infrastructure works, achieving 66.0% of its FY26 order book replenishment target of RM8.0 billion. Future growth is anticipated to be supported by Malaysian government infrastructure spending and opportunities in the industrial properties sector. Nevertheless, year-to-date property sales of RM0.7 billion remain below the internal FY26 target of RM2.0 billion.

In light of these mixed results, the investment bank (Public Investment Bank) has revised its FY26-28F forecast downwards by an average of 9.6% and consequently lowered its target price to RM3.50. Despite these adjustments, the bank maintains an Outperform call on the company, reflecting continued confidence in its long-term prospects. A first interim dividend of 2 sen was declared for the period.