This article first appeared in The Edge Malaysia Weekly on July 15, 2024 - July 21, 2024

HAVING adopted an open layout, the refreshed interior of IJM Corp Bhd’s (KL:IJM) head office represents an openness to new ideas and a willingness to collaborate. However, the makeover of Wisma IJM in Petaling Jaya New Town is not the only thing that the construction giant’s group CEO and managing director Lee Chun Fai has implemented.

IJM, which for the most part had been led by construction marvel Tan Sri Krishnan Tan Boon Seng, is boldly stepping into a new era under Lee, who was appointed to the top post 15 months ago. And the changes being made on top of its strong foundation have not gone unnoticed.

IJM’s share price reached an all-time high of RM3.47 on July 3. The counter was still up more than 80% year to date when it closed at RM3.37 last Friday, valuing the group at RM12.29 billion.

“Now, we are [trading] well above book [value], and that probably signifies that a lot of things are happening,” says the 53-year-old Lee, who started his career in 1995 at Road Builder (M) Holdings Bhd, which was acquired by IJM in 2008.

IJM, which developed a reputation for building offices for major banks in the country such as Affin Bank, HSBC and UOB Bank, pivoted to industrial buildings a few years ago. This not only involves building up its portfolio of industrial assets to generate a more steady recurring income stream for the group, but also continuing to bid for construction jobs, the income from which depends on contract wins and progress billing.

“We got into investments in warehouses as well. And that, I think, opened the whole market for us,” says Lee.

To be sure, IJM is not new to industrial assets, being one of the Malaysian parties that formed the Malaysia-China Kuantan Industrial Park (MCKIP) back in 2013. It is just that it has been consciously increasing its presence in industrial assets in recent years.

In August 2022, IJM entered into a strategic partnership with China Harbour Engineering Co Ltd for the development of the Malaysia-China Kuantan Industrial Logistics Park (MCKILP), an integrated mixed-use development and logistics hub in Kuantan, Pahang, that lies within the East Coast Economic Region. Taking up a 640-acre site at MCKIP 3, the MCKILP will comprise light and medium industrial, logistics and warehousing, residential and commercial components.

Then in July 2023, the group’s wholly-owned subsidiary IJM RE Sdn Bhd entered into a joint-venture (JV) agreement with FMM Elmina Sdn Bhd to develop two state-of-the-art logistics hubs in City of Elmina, Shah Alam.

The partnership includes the establishment of Exio Logistics Sdn Bhd, a special purpose vehicle responsible for the construction and development of the logistics hub. The Elmina logistics hub will have a floor space of 500,000 sq ft and a capacity of 110,000 pallet positions, to be built on a 22-acre freehold land.

In January this year, IJM acquired a 25% stake in Global Vision Logistics Sdn Bhd from Swift Haulage Bhd (KL:SWIFT) and Hartamas Mentari Sdn Bhd, which is developing the Shah Alam International Logistics Hub (SAILH). Being developed on a 71-acre site, SAILH is set to be one of the largest logistics hubs in Southeast Asia. Upon completion of Phase 1 in 2025, the facility will offer 2.8 million sq ft of space, with room to expand the total warehouse space to about six million sq ft. IJM was awarded a RM653.6 million contract to build SAILH.

“When I came in, our target was RM3 billion. Half a year through, we upped the game and said that we would target RM4 billion instead. We managed to close the year at RM3.7 billion, which was already a very successful year for us,” says Lee.

“Of course, we always want to push ourselves. I always tell my people: If you know you’re getting there, let’s push ourselves harder, give yourself a [higher] target. That is what we always do.”

IJM’s outstanding order book is currently RM7.3 billion, having secured RM1.3 billion worth of contracts so far in the financial year ending March 31, 2025 (FY2025).

Having reached RM3.7 billion in contracts last year, just shy of its revised target of RM4 billion, IJM is pushing itself with an even higher target of RM5 billion in contract replenishment in FY2025. While the figure looks ambitious, Lee is confident of getting there. “If you think about the addressable market that we have, the industrial building here is an obvious area of further growth.”

The conclusion of India’s general election opens up opportunities for more infrastructure projects that IJM can participate in, says Lee. The group has made it a priority to bid for toll road projects in that country. It is expecting to secure RM1 billion worth of contracts in the subcontinent.

IJM is also looking forward to participating in the development of the new Indonesian capital Nusantara, which was introduced during outgoing president Joko Widodo’s tenure. However, the development seems to have stalled under president-elect Prabowo Subianto. Although contracts may not be up for grabs in the near term as the new leader sorts out fiscal priorities, the group is confident of securing jobs there as its local counterparts have their hands full.

“We have submitted a good proposal and are confident that our proven expertise will stand us a good chance of being selected,” IJM tells The Edge in a written reply.

The group is involved in building 20 towers of civil servant housing in Nusantara, with its share of the project at about RM1 billion, it says. The funding structure is a private finance initiative backed by Indonesia’s Ministry of Finance.

IJM’s target of RM5 billion in the current financial year seems achievable if the group manages to secure RM2 billion worth of contracts in India and Indonesia on top of the RM1.3 billion it has secured so far.

According to Lee, there are significant growth opportunities for the group in Indonesia, where it aims to expand its horizons, beyond just gunning for infrastructure jobs in Malaysia.

“[When] you are faced with the situation [where] you can’t say with certainty about the rollout of jobs … you need to expand your market so that you have options, and you have to keep working on it,” he says, adding that the group is also eyeing opportunities in Sabah and Sarawak.

Last year, IJM secured a RM260 million contract for the construction and completion of the Kuching autonomous rapid transit depot in Kota Samarahan, Sarawak. The contract was the first the group had secured in that part of the country in the last 12 years.

Beyond this region, IJM is venturing into “spacemaking” in the UK through a partnership with Network Rail Ltd, by identifying suitable brownfield sites on the latter’s land bank for development. Eight sites have been identified so far and are currently undergoing detailed infrastructure and enabling design works, as well as consultation and engagement with key stakeholders and planning authorities, according to the group.

“The eight sites in Central London are expected to deliver up to 3.55 million sq ft of mixed-use developments, including 1,600 residential units, life sciences [facilities], student accommodation and commercial spaces for offices and logistics, with a gross development value exceeding £3 billion (RM18 billion),” says IJM.

Some of the sites may be sold as development rights to other developers, including detailed building plans and permissions. IJM is not buying any land for the project as its contribution is its expertise in urban regeneration and rail over-site developments.

The success of IJM’s first project in London — the Royal Mint Gardens — culminated in the partnership with Network Rail. Completed in 2019, the Royal Mint Gardens features 315,000 sq ft of mixed-used development comprising three condominium blocks of up to 15 storeys that were built over two active railway lines.

“The 256 private residential units are constructed over the Dockland Light Railway and cantilevers over a Victorian Network Rail viaduct at Tower Hill Station, which required the construction of an encapsulation structure over live railway lines. There is a further 446-bedroom aparthotel and 79 residential units being delivered as part of the second phase of this project,” says the group.

Additionally, IJM Land Sdn Bhd, the group’s property development arm, acquired the historic Shredded Wheat factory site in Welwyn Garden City in January 2023. The development of the 11-acre site has been approved for 811 homes and 150,000 sq ft of mixed-use space.

Eventually, the group would like to see its overseas ventures provide between 20% and 30% to its bottom line a year, which Lee says is a good balance. At the moment, the figure is still quite small.

“I think we have planted the seeds — that’s important — rather than just telling you a story. We know that we are already working on real projects. Now, we have to get it finalised to get it to be income producing. That is the next phase for IJM,” he adds.

Apart from securing construction contracts and investing in industrial assets, IJM is also benefiting from the heightened demand for industrial assets such as data centres, through its Industrialised Building System segment.

Lee acknowledges that it is perhaps the expectation that the group could do more that led to the rally in its share price. IJM’s previous record for its order book was north of RM9 billion back in 2017.

“In fact, today people ask, why [are our order book targets] so low [at RM5 billion]? I always say, give me some time, at least half a year. Let’s see how things go. Let’s not grow so fast. A lot of work is still needed,” he says.

“Later on, I think, just like last year, if we feel that the market seems to be kind to us, then we may up the game along the way. That’s why people say it [our target] is very achievable.”

In FY2024, IJM’s net profit surged 214.4% year on year to RM665.19 million as its profit before tax (PBT) almost doubled to RM964.17 million with the earnings of most of its business segments up. While the construction segment’s contribution to its PBT had declined to RM36.81 million from RM173.2 million in FY2020, all the other segments saw huge increases year on year.

PBT from property development stood at RM390.97 million in FY2024, from RM203.26 million in FY2020, while the manufacturing and quarrying segment saw a pre-tax profit of RM181.79 million, from just RM44.9 million five years ago.

IJM’s toll road operations also returned to the black, with a PBT of RM128.38 million, after two consecutive financial years of losses. Its investment and other segments achieved a pre-tax profit of RM74.91 million in FY2024 compared with a pre-tax loss of RM6.36 million in FY2020.

Its port operation — IJM is a shareholder of Kuantan Port Consortium Sdn Bhd, which is a 60:40 JV with Beibu Gulf Holding (Hong Kong) Co Ltd — saw its PBT surge to RM151.39 million in FY2024, or 4.4 times higher than in FY2023.

As at March 31, 2024, IJM’s deposits, cash and bank balances stood at RM2.87 billion. It also had RM657.94 million in financial assets, for total liquid assets of RM3.53 billion.

On the other side of the balance sheet, its short-term debt stood at RM1.72 billion while its long-term debt came to RM3.79 billion. This gave IJM a net gearing of 0.26 times on shareholders’ equity of RM10.22 billion.

When asked whether FY2025 will be a better year for the group, IJM says the construction, property and infrastructure divisions are poised to perform well, based on the high outstanding order book and unbilled sales. “The port should continue [to do well] from the revised tariffs that were introduced in April 2023 on top of improved cargo profile from dry bulk cargo such as silica sand, iron ore, coal and steel products,” it adds.

It is also optimistic about the prospects of the toll road division this year, due to the restructured concessions for the Sungai Besi Expressway (Besraya (M) Sdn Bhd) and the Kajang-Seremban Highway (see “IJM to grow, unlock value in toll road concessions”).

When asked where he sees IJM in five years, Lee says the group would have grown a lot, looking at the projects in its pipeline. Nevertheless, he is aware of the cyclical nature of businesses.

“Good days come, but chances are there will be not-so-good days. This is where diversification into different markets, into new areas of growth is important, because any time when this [economic downturn] happens — hopefully, not a worldwide thing — you would have different regions that you can depend on,” he says.

“The big idea is still all about growth. When I took over, the only word was growth. Because you talk about how we are as a company financially after selling IJM Plantations? Obviously, we are financially strong, gearing is low and it’s alright to do more … It’s [just] about how to invest.” 

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