IJM to see stronger quarters ahead — analysts
KUALA LUMPUR: IJM Corporation Bhd (IJM) is expected to experience stronger quarters ahead, underpinned by accelerating construction billings, analysts observed.
Analysts also deem IJM’s first quarter of financial year 2018 (1QFY18) results to be within expectations.
In a company report, AmInvestment Bank Bhd (AmInvestment Bank) said the group’s reported 1QFY18 core profit of RM127.8 million came in at only 19 per cent of consensus full-year estimates.
This was however still in expectations as the group was anticipated to experience stronger quarters ahead – underpinned by accelerating construction billings.
Agreeing with this, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) pointed out that IJM remained as one of the frontrunners of major local infrastructure contracts from the LRT3, Pan Borneo Sabah, Kuantan Port infra works, the East Coast Railway Link and also multiple building jobs from the private sector.
As a result of this, it guided that it were confident in IJM’s management estimate of an FY18E order-book replenishment target of RM3.0 billion, which also in-line with their own estimate.
Similarly, AmInvestment Bank is also utilising this order-book replenishment target and notes that year-to-date (YTD) for FY18, IJM has already added RM793 million worth of new jobs to its current orderbook of RM8.7 billion.
“Also, it appeared confident that property sales in FY18F would match the RM1.4 billion achieved in FY17. It will continue to focus on small linked homes in Rimbayu , and affordably priced high-rise residential projects in Segambut and Penang.
Its unbilled property sales now stand at RM1.7 billion,” added the bank.
Delving back into the group’s quarterly performance, year over year (y-o-y) its core net profit (CNP) had grown 7 per cent on the back of revenue growth of 12 per cent.
This was mainly driven by revenue growth and margins expansions in its three core divisions – construction, property and infrastructure.
Q-o-q however, its CNP recorded a decline of four per cent with a 12 per cent decline in revenue.
According to Kenanga Research, this was caused by margin compression in some of the groups smaller divisions such as manufacturing and quarrying where its pre-tax margins were down by five points to eight per cent, and increases in raw material prices and lower volumes in its ready-mixed concrete sector.
“Apart from that, its plantation division also saw a 33 per cent decline in pre-tax profit due to higher production costs in Indonesia,” added the research arm.
Overall, both analysts are fairly optimistic on a solid year for IJM moving forward.