IJM: Earnings Rise Despite Missed Forecasts, Positive Outlook Leads to Target Price Uplift

Public Investment Bank reported that a prominent Malaysian conglomerate saw its first-quarter FY26 net profit increase by 10.0% year-on-year to RM95.6 million. However, these results fell short of both the investment bank’s and consensus estimates, accounting for only 15.2% and 17.4% of their respective full-year forecasts. The revenue for the quarter demonstrated robust growth, climbing 23.4% year-on-year to RM1.7 billion.

Performance Review

The growth in net profit was primarily fueled by strong performance in the Construction and Manufacturing & Quarrying (M&Q) divisions. The Construction division’s revenue surged by 79.2% year-on-year to RM968.7 million, attributed to substantial billings from a strong order book. Similarly, the M&Q division recorded a 16.1% increase in revenue to RM311.8 million, driven by higher deliveries of piles, quarry products, and ready-mixed concrete. Profit before tax (PBT) for these divisions also saw significant improvements. Furthermore, the Toll division’s PBT notably rose by 44.4% due to reduced losses from its overseas tollways.

Conversely, the Property and Infrastructure divisions underperformed, contributing to the overall earnings shortfall. Property revenue declined by 29.7% year-on-year to RM240.9 million due to weaker sales. Both the Toll and Port segments experienced revenue dips of 14.7% and 19.1% respectively, primarily due to lower traffic volumes and reduced cargo throughput, particularly in commodity-related shipments. This segmental weakness also impacted their respective PBT contributions.

Future Outlook and Strategy

Despite the mixed quarterly performance, the conglomerate maintains a strong outlook, supported by an outstanding construction order book of RM12.9 billion, which includes a share of associates. This, coupled with approximately RM2.3 billion in unbilled property sales, provides robust earnings visibility for the next two to three years. Year-to-date, the group has successfully secured RM2.9 billion in new contracts, notably in data centers (RM1.4 billion) and the New Pantai Expressway Extension (RM1.4 billion), representing 36.2% of its FY26 orderbook replenishment target of RM8.0 billion.

The construction pipeline is expected to remain robust, benefiting from Malaysian government infrastructure spending and opportunities within the industrial properties sector. For its property division, the group anticipates improved sales with an internal target of RM2.0 billion for FY26, marking a 33% increase from the RM1.5 billion achieved in FY25.

In light of these factors, Public Investment Bank has revised its FY26-28F forecast downwards by an average of 10.9% to account for the weaker-than-expected performance from the Property and Infrastructure divisions. However, the bank has slightly raised its target price for the company to RM4.00, from the previous RM3.80, by rolling over its valuation base to FY27F. Public Investment Bank maintains its Outperform recommendation on the stock.