IF IJM Corp Bhd is able to secure contract for Warisan Merdeka, third Light Rail Transit, Mass Rapid Transit (MRT) Line 2 and highway jobs, earnings from these packages are expected to begin in the financial year 2017, according to MIDF Research.
However, the research house said in the near term, IJM group lacks catalyst as the market has already priced in earlier positive news flows, such as the impending award of RM2.8b worth of West Coast Expressway construction works.
MIDF said the group’s earnings for the first half of financial year 2015 were within its expectation but lagged consensus expectations.
It said IJM’s revenue and profit after tax and minority interest (Patami) in the six-month period remained strong at RM2.6 billion and RM245 million, respectively, with stable Patami margin of 9.2 per cent.
According to MIDF, IJM’s cumulative revenue was lower for its construction segment at RM506.7 million, less 44.4 per cent year-on-year, following the completion of several sizeable projects, particularly Besraya Highway extension in the previous quarters.
However, its profit before tax (PBT) grew by more than 100 per cent year-on-year at RM94.1 million with a healthy PBT margin of 18.6 per cent due to higher margins achieved from its various projects.
“We expect the segment’s performance to accelerate further in the coming quarters on the account of ongoing construction progress of MRT Package V5,” it said in its note.
Property sales are to remain intact as IJM Land’s cumulative revenue of RM990.3 million improved by 10.7 per cent year-on-year, contributed by the faster progress works of ongoing major projects, such as Shah Alam 2 and Bandar Rimbayu.
MIDF reaffirms its “neutral” recommendation on IJM Corp, with a revised target price of RM7.20 as it rolls over it valuation period to the financial year of 2016.
The group’s plantation arm IJM Plantations Bhd recorded more than eight times year-on-year growth in net profit to RM27.1 million in the second quarter of its financial year 2015 due to higher crude palm oil sales volume and lower unrealised foreign exchange (forex) losses.
During the quarter, its revenue rose 16.5 per cent year-on-year to RM173.3 million on higher sales volume from operations in Malaysia (up 12.7 per cent) and Indonesia (up 30.4 per cent).
For the six-month period, the company registered a profit of RM53.2 million.
“Higher fresh fruit bunch (FFB) production drove earnings higher. The significant improvement in earnings was mainly due to higher FFB production, higher sales volume, and lower net unrealised forex loss of RM17.8 million from the US dollar borrowings,” MIDF said.
Despite registering higher FFB production and sales volume, it said IJM Plantations’ Indonesian operation is still in the red.