This article first appeared in The Edge Malaysia Weekly on March 24, 2025 - March 30, 2025

ALLEGATIONS circulating online against IJM Corp Bhd (KL:IJM) and its leadership last week further weighed on the conglomerate’s share price that was already battered by a heavy sell-off in data centre-linked stocks.

Following last week’s hammering, value appears to have emerged in IJM, whose valuation is lagging behind that of its larger peers such as Gamuda Bhd (KL:GAMUDA) and Sunway Construction Group Bhd (KL:SUNCON).

IJM has denied the allegations against the company and its leadership but it did not specifically say what they were, although some media have indicated that it is related to the proposed MRT3 project.

Furthermore, in a statement on March 20, IJM said, “The MRT3 project was an open and competitive tender, with many major Malaysian and foreign contractors participating.

“The tender process was conducted transparently, and any suggestion of improper influence is completely false and misleading. Furthermore, the project has been deferred by the government and the tender process has been called off.”

Last Monday, IJM’s share price fell 11.43% to the day’s low of RM1.86 from its opening of RM2.10. On Friday, the counter rebounded to close at RM2.04.

IJM shares are currently trading at a lower forward 12-month price-earnings ratio (PER) of 14.5 times, against Gamuda’s 18.3 times and SunCon’s 20.6 times, according to Bloomberg data.

In its latest report last Friday, RHB Research noted that IJM’s valuation — at a FY2026 (financial year ending March 31, 2026) PER of 14 times, a discount to its five-year mean PER of 15.7 times — is unjustified, given its leading position as an industrial builder.

“Based on our estimates, industrial jobs (excluding data centres) such as E&E facilities and warehouses make up about 33% of its order book, putting the group in a sweet spot for higher industrial building demand evident from Malaysia’s industrial property overhang, which has declined for four consecutive years from 2021 to 2024, according to the National Property Information Centre,” the research house said.

Earlier this month, CGS International highlighted that the valuation gap differential between IJM and Gamuda and SunCon has widened to a five-year high, which it said was not justified given IJM’s diversified earnings base with recurring income from tolls and the Kuantan Port.

In the past five years, IJM’s share price had been trading below the RM2 mark for the longest time until early 2024 when Malaysia saw a data centre boom on the back of multinational corporations and local companies announcing plans to set up such facilities here.

Compared to its recent peak of RM3.23 in January, the stock had slipped 36.84% to close at RM2.04 last Friday, for a market value of RM7.15 billion. Nonetheless, it still offers a decent upside of 64.2% against the consensus target price of RM3.35. There are 15 “buy” calls on IJM, while three recommend a “hold”.

RHB Research, however, has slashed its earnings estimates by 5% each year for FY2025-27 as IJM is not expected to meet its FY2025 new job win target of RM5 billion. The new target has been revised lower to RM3 billion.

In 2024, IJM clinched its first data centre job in Iskandar Puteri, Johor, from Telekom Malaysia Bhd (KL:TM) for RM331.7 million. Currently, it has three data centre projects in hand, which CGS International estimates accounted for about 13% of the group’s RM6 billion order book at end-2024.

The group recently announced that it was strengthening its presence in the UK via the acquisition of a 143-year leasehold interest in 25 Finsbury Circus — formerly known as 1-5 London Wall Buildings — for £72.5 million (RM407.9 million) from private equity firm TPG Angelo Gordon.

For the first nine months ended Dec 31, 2024 (9MFY2025), IJM’s net profit declined 6.9% year on year to RM274.43 million from RM294.76 million, mainly due to unrealised foreign exchange losses of RM73.4 million. Cumulative revenue increased 7.2% to RM4.46 billion from RM4.16 billion.

In FY2024, its annual earnings more than tripled to RM600.3 million from RM158.3 million in FY2023.

While the group has kept silent on the specifics of the allegations, online chatter alluded to links to investigations into former prime minister Datuk Seri Ismail Sabri Yaakob by the Malaysian Anti-Corruption Commission (MACC) for allegations of misappropriation in relation to the expenditure and procurement of funds during his tenure from August 2021 to November 2022.

Sources familiar with IJM say there could be a few reasons why the allegations have emerged at this point in time, especially when the group is close to securing two hyperscale data centre projects from prominent international clients. The timing is obviously being seen as an attempt to diminish IJM’s chances of bagging the contracts.

“IJM is tipped to win the jobs because of its interest in Industrial Concrete Products Bhd (ICP) as well as a strong execution team and proven track record. A short completion time is needed for the jobs,” says a source.

IJM acquired a 32% stake in ICP from Hume Industries (now known as Hume Cement Industries Bhd [KL:HUMEIND]) for RM95 million in 2004, and subsequently took control of ICP by injecting Malaysia Rock Products Sdn Bhd into ICP for RM110 million. ICP, a market leader in pretensioned spun high-strength concrete piles in Southeast Asia, was taken private by IJM in 2008.

Sources believe that the blog postings containing the allegations were intended to weaken IJM’s share price, in the hope that it would exert pressure on its major shareholders to undertake a takeover or merger exercise.

It is worth noting that SunCon and Malaysian Resources Corp Bhd (KL:MRCB) were among the companies previously associated with a corporate exercise related to IJM.

In 2010, there was a proposal for a merger between IJM’s property unit IJM Land Bhd and MRCB, but it was eventually called off as the parties failed to agree on the terms. Five years later, IJM Land was taken private by its parent IJM.

Then, in 2021, IJM sold its entire 56.2% stake in IJM Plantations Bhd to Kuala Lumpur Kepong Bhd (KL:KLK) for RM1.5 billion, leaving the conglomerate with only construction, property, infrastructure and industry business (essentially piling). Around that time, Sunway Group owned about 5% of IJM but disposed of the stake in 2023.

In a statement issued last Thursday, IJM said it had lodged reports with the Malaysian Communications and Multimedia Commission (MCMC) with regard to the allegations but it did not elaborate further, although it warned it would take legal action if necessary.

MIDF Research says IJM’s proactive governance and transparent management responses reinforce its confidence in the group’s medium- to long-term outlook, underpinning upside potential from current share price levels while remaining well positioned to capitalise on strategic opportunities through the company’s diversified business model.

TA Securities has adopted a more cautious stance.

“At this stage, there is no concrete evidence linking IJM’s chairman to the alleged scandal. As such, we maintain the view that the allegations lack merit unless proven otherwise. Nevertheless, given the potential for reputational risks and lingering uncertainties, investors may opt for a more cautious approach by reducing exposure to the stock pending further clarity,” it says.

The Employees Provident Fund is the largest shareholder of IJM with a 14.87% stake, followed by Amanah Saham Nasional Bhd (12.93%) and Kumpulan Wang Persaraan (Diperbadankan) (9.59%). 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.