FY20 to be better for IJM Corporation
KUCHING: IJM Corporation Bhd (IJM) could likely see a better year in the financial year 2020 (FY20) in terms of its orderbook replenishment, analysts say.
Having only secured RM505 million of job wins year to date ( YTD) in FY19, Maybank Investment Bank Bhd’s research team ( Maybank IB Research) believed IJM was unlikely to achieve its internal RM2 billion job win target for FY19.
Within its forecast, the research team assumed RM1 billion of job wins for FY19 with the remaining contract wins likely to come from hospital or building jobs.
“Positively, new orderbook in FY20 could come from the Central Spine Road, Penang Light City (Phase 2) and Klang Valley Double Track (Phase 2) projects. As for the KVLRT 3, we are still awaiting an official announcement on the details and quantum of cost down,” it said in its report.
As for its plantation segment, the research team pointed out that the division continues to be a drag.
“Checks with IJM suggest that its lower Malaysian FFB production for the first half of FY19 (1HFY19) was largely caused by lower production from its Sugut estate in Sabah as a result of the delayed effect of El Nino.
“This, coupled with the lower CPO ASP of RM2,326 per tonne (down 14 per cent y-o-y) and higher cost from replanting activities in 1HFY19 resulted in a 26 per cent y-o-y drop in PBT for the Malaysian ops.
“On the Indonesian front, production cost is likely to remain high in 2HFY19 from higher depreciation and overheads from its increasing young mature areas in Indonesia,” it explained.
It believed that IJM’s plantation segment is expected to continue to drag IJM’s earnings in 2HFY19.
“Our core earnings forecasts are lowered by three, three and one per cent for FY19E, FY20E, and FY21E largely after adjusting for higher production cost at plantations and lower CPO ASPs,” it said.
All in, Maybank IB Research maintained its ‘hold’ rating on the stock.