IJM may secure WCE jobs worth RM3.5b

by **Cals** Fri 27 Dec 2013, 16:30

Business & Markets 2013

Written by Affin IB Research

Friday, 27 December 2013 10:06

IJM Corp Bhd
(Dec 24, RM5.87)
Maintain buy at RM5.72 with a target price of RM7.04: Kumpulan Europlus Bhd, in which IJM has a 25.1% stake, announced that its 80%-owned subsidiary, West Coast Expressway Sdn Bhd (WCESB), had on Dec 23, 2013 received a written confirmation from the government that WCESB has complied with all the conditions precedent in respect of the concession agreement (CA) for the West Coast Expressway (WCE) project and that the effective date of the CA is Sept 20, 2013. With the confirmation of the effective date, WCESB can commence work on the project.

This long-delayed confirmation is positive news flow for IJM Corp, which has a 20% stake in WCESB. We expect IJM Corp to be appointed the project manager and main contractor, and to secure about RM3.5 billion worth of contracts over five years for the WCE project.

The group’s construction order book is expected to be boosted by another RM3 billion (about RM2 billion in the first phase over three years) worth of jobs from the Kuantan Port New Deep Water Terminal project.

We maintain our financial year 2014 ending March 31 (FY14) to FY16 forecasts for IJM Corp as well as our revised net asset value-based price target of RM7.04 and “buy” call.

In addition to better order book visibility, the group’s profits will also be underpinned by: (i) better crude palm oil average selling price and higher fresh fruit bunch production; (ii) strong property sales and large unbilled property sales of about RM2 billion; (iii) stronger orders for its concrete products; and (iv) good port throughput and improving traffic volumes for its Malaysian toll operations. — Affin IB Research, Dec 24

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This article first appeared in The Edge Financial Daily, on December 27, 2013.