IJM: Mixed Financial Performance as Construction Strength Counters Property Weakness

The company reported a challenging quarter, with its nine-month core earnings for FY26 amounting to MYR288.7 million, an 18% year-on-year decline, falling short of both internal and market expectations. This performance represents 60% of full-year projections. The weaker-than-expected results were primarily attributed to a softer property segment, which overshadowed robust contributions from its construction and industrial divisions.

Performance Review

The construction arm delivered a strong performance, recording a pre-tax profit (PBT) of MYR42.5 million, marking a significant 119% year-on-year increase. This surge was driven by heightened construction activity stemming from a healthier orderbook, leading to an improved PBT margin of 4.9% for the quarter, up from 3.5% a year ago. Similarly, the industrial segment experienced an 8% year-on-year rise in PBT, fueled by higher deliveries of piles and ready-mixed concrete. The toll division also saw impressive growth, with PBT increasing by over 100%, benefiting from higher contributions from local tollways, reduced losses from the West Coast Expressway associate, and enhanced profits from its Argentinian associate.

In contrast, the property segment faced substantial headwinds, recording a pre-tax loss of MYR42 million for the quarter, a sharp reversal from the MYR171 million profit in the corresponding period last year. This decline was largely due to lower property sales amidst slow launch trends and significant development expenses. The report notes that, excluding foreign exchange losses, the property division would have achieved a breakeven position. Meanwhile, the port division’s PBT fell by 22% year-on-year, impacted by lower cargo throughput and major maintenance activities.

Future Outlook and Risks

Looking ahead, the company maintains a substantial remaining orderbook of approximately MYR8.4 billion for domestic projects and MYR5.7 billion for JRL Group initiatives. Data centre (DC) jobs are estimated to constitute 30-40% of the total orderbook. Year-to-date domestic FY26 contract wins stand at MYR6.5 billion, aligning with the group’s target range of MYR6-8 billion. Significant opportunities are in the pipeline, including a potential MYR1 billion civil servant housing project in Indonesia’s Nusantara capital, with an award possibly by early FY27, and participation in the MYR4 billion Penang Light Rail Transit Segment 2, for which tender outcomes are anticipated in the second half of FY26.

Despite the mixed results, the investment bank has revised down its FY26-28F earnings forecasts by 13-14% due to adjusted property billing assumptions, though its target price remains unchanged. Key downside risks include the potential failure to secure new contracts in a timely manner.