Kenanga Research: Neutral on IJM’s investment in SAILH logistic hub
KUCHING: Analysts at Kenanga Investment Bank Bhd’s research arm (Kenanga Research) are neutral on the recent news of IJM Corporation Bhd’s (IJM) investment in the Shah Alam International Logistics Hub (SAILH) due to its insignificant contributions in terms of recurring rental and related incomes.
In a press statement on January 12, IJM announced that through its whollyowned subsidiary IJM RE Sdn Bhd, it has signed a share sale agreement with logistics provider Swift Haulage Bhd and Hartamas Mentari Sdn Bhd to acquire a 25 per cent stake in Global Vision Logistics Sdn Bhd (GVL), the developer of SAILH.
SAILH which sets on a 71acre site in Shah Alam is set to be one of Asean’s largest and Malaysia’s first green-certified logistics hub.
IJM group chief executive officer (CEO) and managing director Lee Chun Fai said that the investment in SILH is a strategic move by IJM to address the increasing demand of the logistics sector that is spurred by e-commerce growth and supply chain diversification.
However, in a company update report, Kenanga Research guided that the 25 per cent equity stake implies associate income of around RM1.5 to RM2 million if the warehouse runs at 100 per cent capacity.
They deemed this contribution to be ‘insignificant’ to IJM as it represents less than one per cent of IJM’s earnings.
Moreover, the research arm also noted that the purchase price is on the high side as the implied land cost of RM180 per square feet (psf) is above the asking price of between RM109 and RM138 psf for comparable lands in the surrounding area.
“However, this is justifiable given the development approvals secured for the logistic hub project,” they added.
On a more positive note, the research arm reckons that IJM would be posed for a slice of action in the construction contract for SAILH’s next phase of development as well as the current Phase 1 in which IJM has already secured a RM653.6 million building job back in
2023.
SAILH’s is slated to be completed by 2028 and its estimated development cost of RM1.3 billion is expected to be funded with Asean Green Sri Sukuk which has a nominal value of up to RM1.5 billion.
The proposal investment is expected to increase IJM’s FY24 forward net gearing slightly to 0.51-times from 0.52-times.
In the same press statement, IJM also announced that it would be acquiring the historic Shredded Wheat factory site in Hertfordshire Country’s commuter town Welwyn Garden City.
The 11-acre UK site has been greenlit for redevelopment for 811 homes and 150,000 sf of mixed-used space.
While, the details of the UK land acquisitions such as its pricing and gross development value (GDV) has yet to be announced, Kenanga Research guides that this deal which could lead to IJM replicate and build on its success in the Royal Mint Garden project in Central London.