Maybank upgrades IJM Corp to "buy", raises TP to RM6.10

Business & Markets 2013
Written by Kamarul Anwar of theedgemalaysia.com
Friday, 26 April 2013 11:19
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KUALA LUMPUR (April 26): Maybank Investment Bank has upgraded
IJM CORPORATION BHD [] to a “buy” from “hold” and raised the
group’s target price by 8.9%, as the research house views the stock to
be undervalued.
In a note today, Maybank analyst Wong Chew Hann revised the target
price on IJM Corp’s to RM6.10 from RM5.60.
At 10:53 am, the group’s counter went up three sen to its intraday high
of RM5.50. A total of 601,100 shares changed hands.
“The crystalisation of major CONSTRUCTION [] job wins by the end of
this year, record-high property sales, strategic property landbanks with
high capital appreciation potential and an expansion at its Kuantan Port
are not fully reflected in IJM Corp's share price,” said Wong.
He pointed out that IJM’s current valuations are at 13.2 times its
calendar year 2014 (CY14) earnings, which are below its long-term
mean of 14 times.
“Our new target price implies a CY14 price-earnings ratio of 14.7
times,” Wong noted.
He said IJM’s construction division’s outstanding order book stands at
RM2.8 billion, which he estimates will last through its financial year
ending March 31, 2016 (FY16).
“Having inked the West Coast Expressway (WCE) concession in Jan
2013, the next milestone is to achieve financial close in nine months’
time, after which construction can begin. The announced project value is RM6 billion; we estimate the construction value is
over RM5 billion. Elsewhere, Kuantan Port’s new deepwater terminal offers sizeable works worth a few billion ringgit.
“These two contracts, if secured in full by IJM Corp’s construction division, will substantially replenish its current outstanding
order book of about RM2.8 billion,” Wong said.
He also said that IJM Corp’s property division IJM Land Bhd, which posted record sales of RM1.8 billion in FY13, now has an
internal target of property sales of RM2 billion in FY14.
“IJM Land’s undeveloped landbank in Malaysia remains sizeable at about 6,200 acres, with potential gross development value
(GDV) at an estimated RM38 billion (or 4,734 acres and estimated potential GDV of RM25.2 billion, based on its effective
stake),” Maybank’s Wong wrote.