IJM’s recovery prospects remains intact, bolstered by most segments
IJM Corporation Bhd’s (IJM) recovery prospects remains intact bolstered by most segments.
Its industry segment remains the laggard with offtake still slow, analysts note, while longer term prospects for its construction segment remains hinged on rollout of projects under Budget 2021, MRT3 as well as additional sector clarity from the 12th Malaysia Plan (12MP).
Following a meeting with management recently, the research arm of Hong Leong Investment Bank Bhd (HLIB Research) gathered that for financial year 2021 (FY21), port throughout should come in above FY20 numbers.
“China’s infra pump priming and environmental concerns as well as general economic recovery has aided resilient volumes seen at the port registering circa two to three million freight weight tonnes (fwt) pm,” HLIB Research said.
“Longer term, IJM is expecting potential expansion of an existing occupier into MCKIP 3 which augurs well for throughput growth.”
Overall, the research arm believed long term thesis for the port remains intact with healthy foreign direct investments (FDIs) into MCKIP (land sales) driving throughput growth.
Meanwhile, HLIB Research highlighted that IJM’s New Pantai Expressway (NPE) and Sungai Besi Highway (BESRAYA) have recovered close to pre-pandemic levels since the relaxation of MCO2.0 at roughly 90 per cent.
The research arm believed concerns over public transportation use due to Covid19 has somewhat contributed to a rebound in traffic flow.
“As for West Coast Expressway (WCE), its land acquisition cost overrun could ultimately result in new funds worth RM200 million to RM300 million being injected further.”
On IJM’s property segment, HLIB Research recalled that IJM’s property sales in the first nine months of FY21 (9MFY21) (RM1.1 billion) has so far exceeded management’s full year guidance of RM800 million to RM1 billion.
“Excluding foreign sales (circa RM150 million) domestic sales would still have come in at the upper end of guidance by 9MFY21.”
The research arm reckoned the positive surprise can be attributed to low interest rates as well as Home Ownership Campaign (HOC) reintroduced last year.
“Going forward, extension of HOC beyond May 31, 2021 would set the tone for targets in FY22. FY21 new launches will likely come in at RM984m with landed properties making up the bulk of this due to their demand resilience.”
At this juncture, the research arm’s sales expectations for FY22 of RM1.2 billion look comparatively tame should the HOC be extended.