IJM Corp’s 3QFY23 net profit rose 106.3% QoQ due to astounding contribution from the property division which saw a jump of more than 100% QoQ at pretax level. After adjusting for one-off gains, core net profit came in 9.4% higher QoQ. Cumulatively, 9MFY23 results are broadly in-line with ours and consensus estimates, accounting for 77.2% and 73.9% of respective full year forecasts. Moving forward, we anticipate a decent quarter in 4QFY23 as we foresee favourable macro developments amongst the Group’s business divisions with exception to its core business, construction which probably would have more clarity in FY24. Hence, we retain our earnings estimates and our Outperform call with an unchanged sum-of-parts TP of RM1.97.
- QoQ revenue flattish. The Group revenue was driven by the property segment, property sales surged 41% QoQ due to improved sales mainly from the townships located in the central region such as Bandar Rimbayu and Uptown Square Phase 2. Furthermore, the infrastructure segment expanded marginally at 1% QoQ supported by the higher-than-usual traffic volume during festivities on the local highways.
- QoQ PBT rose 9.4%. Earnings at pretax level was buoyed by property earnings which saw an increase of more than 100% QoQ mainly due to higher profit margin derived from the current portfolio of development projects. The division also recorded narrower foreign exchange losses, down 65% QoQ from its UK property – Royal Mint Gardens, resulted from sharp Ringgit depreciation throughout Oct to Dec.
- Steady earnings momentum ahead. We anticipate a decent quarter, going into 4QFY23, as we foresee property sales to add at least 40% to its full-year FY23 property sales target of RM1.8bn (currently achieved RM2.4bn property sales). Additionally, we expect industry and infrastructure division to pick up as material prices has gone down, stronger traffic volume from New Year holiday, coupled with some recovery in cargo throughputs due to China reopening. On construction, we think more clarity will come in FY24 pending the Group’s job bids on India infrastructure projects and MRT3.
Source: PublicInvest Research - 24 Feb 2023