PP 7767/09/2010(025354)

RHB Research
Corporate Highlights
Malaysia
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

R e su lts N ot e
26 August 2010
MARKET DATELINE

IJM Corporation Share Price

Fair Value
:
:
RM4.95
RM5.01
1QFY03/11 Net Profit Grows 27% YoY Recom : Market Perform
(Maintained)

Table 1 : Investment Statistics (IJM; Code: 3336) Bloomberg: IJM MK

Net FD Net
FYE Turnover Profit# EPS# Growth PER EPS C.EPS P/CF P/NTA ROE Gearing GDY
Mar (RMm) (RMm) (sen) (%) (x) (sen) (sen) (x) (x) (%) (%) (%)
2010 4,013.5 263.6 20.0 (14.8) 24.8 - - nm 1.3 5.1 0.5 2.2
2011f 5,984.4 428.6 31.7 58.9 15.6 30.5 30.0 11.5 1.2 7.9 0.4 2.2
2012f 5,585.6 440.2 32.6 2.7 15.2 31.3 34.0 11.3 1.2 7.6 0.3 2.2
2013f 5,483.3 462.2 34.2 5.0 14.5 32.8 39.0 11.2 1.1 7.5 0.2 2.2
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC #Ex-EI * Consensus Based On IBES Estimates

♦ No issue. 1QFY03/11 net profit came in at 21-22% of our full-year

RHBRI Vs.
Above
Consensus

forecast and the full-year market consensus. However, we consider the

In Line
results within expectations as we expect stronger quarters ahead as Below
construction activities at newer projects that command higher margins
gather momentum. Issued Capital (m shares) 1,349.3
Market Cap(RMm) 6,679.1
♦ Guidance of RM2bn new orderbook. At present, IJM outstanding Daily Trading Vol (m shs) 2.9
construction orderbook stands at RM3.6bn. During the analysts’ briefing in 52wk Price Range (RM) 4.09-5.07
May 2010, IJM maintained its guidance on RM2bn new contracts to be Major Shareholders: (%)
secured per annum. So far during FY03/11, it has only secured RM597m EPF 18.4
Amanah Saham B’putera 7.5
(see Table 4). Locally, IJM is eyeing, among others, the remaining
Zelan 7.1
upstream packages of the Pahang-Selangor Interstate Raw Water Transfer
project, runway of the new LCCT, Ampang and Kelana Jaya LRT line FYE Mar FY11 FY12 FY13
extension project and selective project under the SCORE in Sarawak. On EPS Revision (%) - - -
the overseas front, IJM’s key focus is on road projects in India including Var to C.EPS (%) +6 -4 -12
the possibility of participating as concessionaires. In our earnings
PE Band Chart
forecasts, we assume IJM to secure RM2bn worth of new contracts in
PER = 20x
FY03/11. PER = 16x
PER = 12x
♦ Forecasts. Maintained. PER = 8x

♦ Risks. The risks include: (1) New contracts secured coming in below our
target of RM2bn p.a.; and (2) Steep increases in input costs.

♦ Maintain Market Perform. We are upbeat on the construction sector as

we foresee construction stocks to generally outperform the market in Relative Performance To FBM KLCI
2H2010, buoyed by news flow, particularly, from: (1) The RM36bn KL MRT
project; (2) The RM7bn Ampang and Kelana Jaya LRT line extension
IJM Corporation
project; and (3) Federal land deals. IJM has been pre-qualified to bid as
main contractor and segmental box girder sub-contractor for the Ampang
and Kelana Jaya LRT line extension project. However, upside in IJM’s FBM KLCI

share price is capped by rich valuations. Indicative fair value is RM5.01

based on 16x fully-diluted FY03/12 EPS of 31.3sen, in line with our 1-year
forward target PER for the construction sector of 10-16x.

Joshua CY Ng
(603) 92802151
Please read important disclosures at the end of this report. joshuang@rhb.com.my

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 26 August 2010

Table 2: Earnings Review (YoY Cumulative)

FYE Mar 2010 2011 YoY Observations/Comments
(RMm) 3M 3M Chg
Turnover 1,161.6 986.1 (15%) Weaker topline performance from construction and industries.
Construction 474.1 237.7 (50%) Older projects at the tail-end while certain new projects had yet to achieve key
billing milestones.
Property 284.8 365.0 28% Increased new launches on the back of the recovery in the property sector.
Industries 236.3 189.6 (20%) Lower volumes and prices, particularly, for aggregates and ready-mix concrete.
Plantation 94.3 113.3 20% Boosted by a 10% increase in average CPO price realised from RM2,249/tonne to
RM2,480/tonne, and a 13.3% growth in FFB production.
Infrastructure 71.7 80.4 12%
Investment & others 0.4 0.2 (44%)
EBIT 157.7 210.8 34% Driven largely by improved property and plantation profits.
Net inc/(exp) (46.3) (41.5) (10%)
Associates & JVs 12.4 9.7 (22%)
Pretax profit 123.9 179.1 45%
Taxation (37.6) (47.5) 26%
Minority interest (15.4) (41.5) >100%
Net profit 70.8 90.0 27% Driven largely by improved property and plantation profits.
EPS (sen) 5.4 6.8 25%

Construction PBT margin 2.1% 3.8% 1.6% pts Boosted by newer projects that commanded higher margins.
EBIT margin 14% 21% 8% pts
Pretax margin 11% 18% 7% pts
Effective tax rate 30% 27% (4% pts)

Pretax profit breakdown

Construction 10.2 9.0 (11%) Weaker topline, partially cushioned by improved margins.
Property 41.0 84.7 >100% Increased new launches on the back of the recovery in the property sector.
Industries 47.5 29.1 (39%) Lower volumes and prices, particularly, for aggregates and ready-mix concrete.
Plantation 11.4 38.8 >100% Higher CPO prices and FFB production.
Infrastructure 14.3 15.4 8%
Investment & others (0.4) 2.1 nm
Total 123.9 179.1 45%

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Table 3: Earnings Review (QoQ)

FYE Mar 2010 2011 QoQ Observations/Comments
(RMm) 4Q 1Q Chg
Turnover 866.5 986.1 14%
Construction 244.1 237.7 (3%) Normal quarterly fluctuation in billings.
Property 247.9 365.0 47% Continued recovery in the property sector.
Industries 189.2 189.6 0%
Plantation 102.0 113.3 11% A 5.1% increase in average CPO price on flattish FFB production growth.
Infrastructure 82.6 80.4 (3%)
Investment & others 0.6 0.2 (63%)
EBIT 138.1 210.8 53% Driven largely by improved property and plantation profits.
Net inc/(exp) (56.4) (41.5) (26%)
Associates & JVs 12.2 9.7 (20%)
EI 69.0 0.0 nm Forex and disposal gains in 4QFY10.
Pretax profit 162.8 179.1 10%
Taxation (30.2) (47.5) 57%
Minority interest (21.6) (41.5) 92%
Net profit 111.0 90.0 (19%) High base in 4QFY10 due to forex and disposal gains, coupled with a higher
effective tax rate in 1QFY11.
EPS (sen) 8.4 6.8 (19%)

Construction PBT margin 3.1% 3.8% 0.6% pt Boosted by newer projects that commanded higher margins.
EBIT margin 16% 21% 5% pts
Pretax margin 19% 18% (1% pt)
Effective tax rate 19% 27% 8% pts

Pretax profit breakdown

Construction 7.7 9.0 17% Driven by newer contracts that carried higher margins.
Property 28.8 84.7 >100% Continued recovery in the property sector.
Industries 35.7 29.1 (18%) Cost pressure.
Plantation 24.8 38.8 57% Higher CPO prices.
Infrastructure 6.5 15.4 >100%
Investment & others 59.4 2.1 (96%)
Total 162.8 179.1 10%

Table 4 : New Jobs Secured Recently

When Contract Value IJM’s Share
(RMm) (%) (RMm)
Apr 10 Packages A1 & B2 of Murum Access Road 247 100 247
Jun 10 Batu Kawan Expressway (Package 3B, The Second Penang Bridge) 350 100 350
Total 597
Source: Bursa Malaysia

Table 5: Earnings Forecasts Table 6: Forecast Assumptions

FYE Mar (RMm) FY10a FY11F FY12F FY13F FYE Mar FY11F FY12F FY13F

Turnover 4,013.5 5,984.4 5,585.6 5,483.3 Construction EBIT margin (%) 8.0 8.0 8.0
Turnover growth (%) -12.8 49.1 -6.7 -1.8 New orderbook secured 2.0 2.0 2.0
(RMbn)

EBITDA 806.2 1000.0 1,018.6 1,036.0

EBITDA margin (%) 20.1 16.7 18.2 18.9

Depreciation -126.5 -126.5 -126.5 -126.5

Net Interest -201.4 -147.1 -124.2 -102.1
Associates 30.7 18.5 18.5 18.5
EI 69.0 0.0 0.0 0.0

Pretax Profit 578.0 744.9 786.5 825.9

Tax -154.9 -186.2 -196.6 -206.5
PAT 423.2 558.7 589.9 619.4
Minorities -90.6 -130.1 -149.7 -157.2
Net Profit 332.6 428.6 440.2 462.2
Source: Company data, RHBRI estimates

IMPORTANT DISCLOSURES

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Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
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Industry/Sector Ratings

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