IJM, sweet entry spot

KUALA LUMPUR: IJM Corp Bhd’s current share price of RM1.27 (as at 10:23am Thursday) brings about a sweet entry spot to accumulate this sector heavyweight, RHB Research said.

This is despite IJM reporting first quarter (Q1) net profit of RM1.3 million, down 98 per cent quarter-on-quarter (QoQ), which is below RHB Research and consensus’ estimates.

RHB said IJM’s earnings were normalising and might point to stronger financial year 2022 numbers.

It said after falling 32 per cent in the last three months, the stock is now trading at an attractive 11 times financial year 2022 price earnings ratio versus a historical five-year mean of 16x.

“We remain upbeat that IJM’s income visibility may be extended, on an expected healthy job pipeline next year.

“While the take-up rate for new units will likely remain soft compared to previous years, we believe the 1.1 roll-out of government relief measures will lend support in the near term.

“Note that unbilled sales stand at RM1.2 billion,” it said.

Nevertheless, RHB Research has cut IJM’s earnings forecast by 12 per cent, 12 per cent and 14 per cent respectively for financial years 2021-2023.

This is after adjusting for lower-than-expected earnings, mainly from the construction and property segments in the quarter.

“IJM’s recent exclusion from the MSCI Global Index earlier this month may affect sentiment on the stock.

“However, we think this is only short-lived, as we expect more positive news flow relating to mega projects to surface from second half 2020 onwards,” it said.

IJM has upgraded its “neutral” call on IJM to “buy” with a higher target price of RM1.69 from RM1.57 previously.

Source: TheEdgeMarkets