KUALA LUMPUR: CIMB Equities Research said IJM Corp's annualised 1H16 core net profit made up 95% of its full-year forecast and 85% of consensus.
The research house said on Wednesday the results were in line as 1Q is a seasonally weak period.
“Excluding the RM168mil net gain from partially divesting a tollway, earnings were weaker on-year across all divisions, particularly property due to weak post-GST demand, albeit partially offset by stronger construction margins,” it said.
CIMB Research retained its FY16-18 EPS forecasts but trimmed its target price from RM8 to RM7.65 as it updates for balance sheet items (still 10% RNAV discount).
It said the likely catalysts in the medium term for IJM Corp were construction-focused, backed by the group's RM20bil domestic tender book which includes the MRT 2.
“The (Q1) performance was broadly in line as 1Q is seasonally weak. We expect future quarters to be driven by the group's all-time high order book of RM7bil,” it said.
CIMB Research said all of IJM’s divisions reported a decline except for industries, which benefitted from industry-wide job roll-out.
The 57% on-yer drop in property development pretax profit (1Q16 pretax margin of 17% vs. 24% in 1Q15) was not a big surprise given IJM’s earlier guidance of weak demand post-GST.
“Construction pretax margin stood at 19%, likely due to final certification of works, and should normalise lower before new jobs kick in,” it said.
The research house said the external jobs, which account for most of its record outstanding order book of RM7bil, provided good earnings visibility over the next two to three years.
“We expect IJM to be selective given the abundance of building and infra jobs backed by the 11th Malaysia Plan (11MP). For new jobs, we maintain our projection of RM1.5bil worth of potential wins in FY16.
“At this juncture, the group is not bullish on overseas projects given the abundance of incoming domestic jobs, from both the public and private sectors. As at end-FY15, the group's total value of jobs in tender and targeted for tenders stood at RM20bil.
“We continue to expect IJM to be among the earlier winners of MRT 2 above-ground packages, the award of which should begin in 1H16. Other potential catalysts could be other medium-sized domestic building jobs,” it said.