IJM Corporation Berhad (IJM) secured two substantial contracts worth RM962 million, with the first for constructing a logistics hub in Shah Alam for RM584 million and the second for a semiconductor manufacturing facility in Penang for RM378 million. RHB Investment Bank (RHB) maintained its BUY rating, raising the target price to MYR3.60 and projecting a 20% upside and a 3% yield, as cited in their report on June 24, 2024.
The company’s outstanding construction order book now stands at approximately RM 7 billion, translating into an orderbook-to-revenue cover ratio of around 3x. RHB noted that 20–30% of IJM’s order book comes from industrial jobs, positioning it as the contractor with the highest number of industrial job wins, excluding data centres, among large-cap contractors in the past year.
IJM’s prospects in the industrial building segment appeared strong, as the planned supply of industrial properties surged to 1,372 units in 2023, compared to below 900 units in the previous five years. Growth in industrial properties was 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 RM83.7 billion in 1Q25.
Additionally, there was potential for IJM to secure data centre jobs, given the group’s industrialised building systems factory in Bestari Jaya, which could be adapted for such projects. Other potential job wins for FY25F included the civil servant housing project in Indonesia’s Nusantara capital and the New Pantai Expressway extension, each valued at approximately RM1 billion.
RHB stated there were no changes to IJM’s earnings estimates as the latest job wins were within the FY25F job replenishment target of RM5 billion. The target P/E for IJM’s construction arm was increased to 18.5x from 16x, reflecting the company’s edge in industrial jobs and upcoming infrastructure projects like the Penang Light Rail Transit.
The target P/E for the industry division was also adjusted to 10x from 8x, considering IJM’s exposure to data centre jobs through its industrial concrete products business and two factories in Johor, a data centre hotspot. As a result, RHB arrived at a new SOP-derived target price of RM3.60, previously RM3.15, after ascribing a 2% ESG premium. Re-rating catalysts included earlier-than-expected wins for data centre jobs and new contracts 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 20% to the target price of RM3.60.
