IJM: Construction Group Secures Major Data Centre Contract, Target Price Maintained
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM3.46 (+31.1%) |
| Last Traded | RM2.64 |
| Recommendation |
A leading construction group has significantly bolstered its order book with the securing of a substantial mechanical & electrical (M&E) fit-out works contract for a hyperscale data centre in Selangor. The new award, valued at RM873.9 million, contributes to an impressive total outstanding order book, providing robust earnings visibility for the coming years.
Contract Details
The contract, secured by its wholly-owned subsidiary, involves the comprehensive M&E fit-out for a data centre hall within the Elmina Business Park. The scope encompasses the supply and installation of essential mechanical, electrical, security, and telecommunication systems, alongside system coordination, commissioning, and the provision of office furniture and equipment. The project is expected to commence in the third quarter of 2026, with completion slated for the first quarter of 2028, reflecting an 18-month construction period. This M&E component follows an earlier award for the core and shell main building works of the same hyperscale data centre project.
Financial Outlook and Strategic Growth
With this latest win, year-to-date new contract awards have climbed to RM5.1 billion, pushing the total outstanding order book to RM15.1 billion. This robust order book represents a substantial 5.0 times cover of the construction segment’s revenue forecast for fiscal year 2026, ensuring strong earnings visibility over the next five years. Analysts estimate that, with a conservative net margin of approximately 6%, this contract alone could add RM52.4 million to the group’s bottom line. The group has now fulfilled about 85% of its FY26 new job win target of RM6.0 billion and is well on track to meet its full-year target. Significantly, cumulative data centre-related project wins now stand at RM4.8 billion, with FY26 year-to-date data centre-related jobs constituting about 70% of total job wins, underscoring its accelerating penetration into this high-growth sector.
Contract Value Insights
While the contract value of RM873.9 million fell slightly below some initial analyst projections (which ranged from RM960 million to RM1.28 billion), this discrepancy is attributed to several factors. These include the possibility of a smaller actual capacity awarded under the current phase, with subsequent expansions likely to be phased out, as well as optimised design specifications, value engineering initiatives, and procurement efficiencies that led to lower construction costs per-MW. Despite this, the award was within the investment bank’s overall expectations for order book replenishment, leading to unchanged earnings forecasts.
Analyst Recommendation
TA Securities maintains its BUY recommendation on the stock, with a Target Price of RM3.46, representing a 31.1% upside from the last traded price of RM2.64. The valuation is based on 1.1 times CY26 Price-to-Book ratio, incorporating a 3% ESG premium consistent with its 4-star ESG rating. The investment bank continues to favour the group for its strong position as a front-runner for large-scale infrastructure projects, such as the Penang LRT and Nusantara civil servant housing, and its expanding footprint in the thriving data centre industry. The group’s strong execution track record, integrated engineering and construction capabilities, and established relationships with leading hyperscale data centre operators are expected to further solidify its market position.
