RHB Investment Bank (RHB) reported that IJM Corporation Berhad (IJM) has been awarded a RM 332 million contract to design and construct Block 2 of the Iskandar Puteri Data Centre for TM Technology Services. This project, which is IJM’s first data centre job, is expected to commence in July and be completed by the third quarter of 2025.
RHB maintained its BUY rating for IJM with a target price of RM 3.60, projecting a 19% upside and a 3% yield. The current market price of IJM’s shares is RM 3.03, giving the company a market capitalisation of USD 2,253 million.
IJM has so far secured RM 1.3bn worth of new jobs for FY25, including the latest data centre contract, against its target of RM 5bn for the year. The company’s outstanding construction order book now stands at approximately RM 7.3bn, translating to an orderbook-to-revenue cover ratio of about 3x. RHB estimated that around 20–30% of IJM’s construction order book consists of industrial jobs.
RHB noted that IJM has two factories for industrial concrete piles in Ulu Choh and Senai, Johor, which could be utilised for providing concrete piles for the new data centre project. IJM’s industry division has previously supplied 25% of its spun piles to data centres, logistic warehouses, and electronics manufacturing projects.
IJM’s industrialised building system (IBS) solution has been used in industrial projects, such as ASE Electronics’ factory in Penang, the first in the northern region to use the BubbleDeck biaxial suspended floor slab system. This system minimises material usage, reduces resources and energy consumption, and enhances construction speed and efficiency. RHB did not discount the potential deployment of IJM’s IBS solutions for the new data centre job.
Prospects for IJM in the industrial building segment appear strong, with the planned supply of industrial properties surging to 1,372 units in 2023, compared to below 900 units in the previous five years. Growth in this segment is expected to be driven by semiconductor facilities and warehouses, supported by robust investment trends, with Malaysia recording a 13% year-on-year increase in investments, reaching RM 83.7bn in 1Q24.
There were no changes to IJM’s earnings estimates as the latest job wins were within the FY25F job replenishment target of RM 5bn. RHB’s SOP-derived target price of RM 3.60, which includes a 2% ESG premium, remains unchanged. Potential catalysts for a rerating include earlier-than-expected wins for other data centre jobs in Selangor or Johor and projects in Sarawak and Indonesia by the end of 2H24.
Investors are encouraged to consider IJM shares, given the company’s solid position in the industrial job market and its potential for future contract wins, which could drive the stock price up by 19% to the target price of RM 3.60.
