KUALA LUMPUR (Aug 29): Shares of IJM Corporation Bhd (KL:IJM) dropped on Thursday to their lowest in nearly three months, following the construction giant’s weaker-than-expected quarterly results.

IJM fell as much as 9.3% or 29 sen to RM2.83, its lowest since June 13, 2024. The stock was trading at RM2.85 at 9.45 am, giving the company a market capitalisation of RM10.39 billion. Trading volume totalled 7.2 million shares so far.

RHB Research said despite the weak performance, IJM still has an upside amid an anticipated steady flow of industrial jobs, which is estimated at 35% to 40% of its order book.

IJM, at 22 times price-earnings (P/E) for the financial year ending March 31, 2025 (FY2025), could be buoyed by the order book, backed by a 13% year-on-year (y-o-y) jump in Malaysia’s approved investments for the first quarter of calendar year 2025, the research house added.

"Industrial jobs were absent during the 2017 upcycle, when IJM traded at 16 times to 17 times [P/E]," said the house in a note on Thursday. It maintained its 'buy' call on the counter.

It noted that IJM had secured RM1.9 billion worth of new jobs in FY2025 so far (FY2024: RM3.7 billion), with an outstanding order book of RM7 billion (including wins in the second quarter ending Sept 30, 2024 or 2QFY2025), the highest since end-FY2019’s RM7.8 billion.

"As for new job wins in FY2025, we stick to our RM5 billion target, potentially coming from the civil servant housing project in Indonesia’s new capital city (about RM1 billion) and the New Pantai Expressway extension (about RM1 billion), plus factories and warehouses, among others," said the house.

RHB noted that IJM's 1QFY2025 core profit of RM98 million (+47% y-o-y) missed expectations, making up 19% for its and the street’s full-year projections due to a weaker-than-expected property segment. 

The property segment recorded a profit before tax decline of 51% y-o-y in 1QFY2025, partly due to lower-level work progress for the division’s ongoing developments. 

"Nonetheless, we expect higher property sales in the coming quarters, backed by about RM3.5 billion of planned launches in FY2025, which could facilitate better sequential sales from the RM256 million recorded in 1QFY2025," said RHB.

RHB tweaked its FY2025 to FY2027 earnings downwards by 3%, 4%, and 4% respectively, as it imputed more conservative recognition of IJM’s property segment. 

The house also rolled forward its valuation base year to FY2026 from FY2025, resulting in a new sum-of-parts-derived target price of RM4.39.

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