PP 7767/09/2010(025354)

Malaysia Corporate Highlights

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

New s Upda te
16 June 2010
MARKET DATELINE

IJM Corporation Share Price

Fair Value
:
:
RM4.82
RM5.01
Secures RM350m Batu Kawan Expressway 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) 24.1 - - nm 1.3 5.1 0.5 2.3
2011f 5,984.4 428.6 31.7 58.9 15.2 30.5 30.0 11.2 1.2 7.9 0.4 2.3
2012f 5,585.6 440.2 32.6 2.7 14.8 31.3 34.0 11.0 1.1 7.6 0.3 2.3
2013f 5,483.3 462.2 34.2 5.0 14.1 32.8 40.0 10.9 1.1 7.5 0.2 2.3
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC #Ex-EI * Consensus Based On IBES Estimates

Issued Capital (m shares) 1,333.6

Second key job this year. IJM has been awarded by Jabatan Kedua Market Cap(RMm) 6,428.0
Sdn Bhd the Package 3B of The Second Penang Bridge, namely, the 5.7- Daily Trading Vol (m shs) 2.8
km dual-lane Batu Kawan Expressway for RM350m. Assuming an EBIT 52wk Price Range (RM) 3.79-5.01
margin of 8%, the latest contract will fetch a total EBIT of RM28m over Major Shareholders: (%)
the construction period of 31 months from June 2010. This is the second EPF 19.5
Zelan 8.6
key job IJM has secured in FY03/11, on the heels of the two work
Amanah Saham Bputera 5.5
packages of the Murum access road worth a total of RM247m secured
back in Apr 2010. The latest contract has boosted its YTD new contracts FYE Mar FY11 FY12 FY13
secured to RM597m (see Table 2) and its outstanding construction EPS Revision (%) - - -
orderbook by about 10% to RM4bn. We are positive on the latest Var to C.EPS (%) +6 -4 -14
development.
PE Band Chart
Forecasts. No change in our earnings forecasts that already assume IJM
PER = 20x
to secure RM2bn worth of new jobs in FY03/11. PER = 16x
PER = 12x
Risks. The risks include: (1) New contracts secured coming in below our PER = 8x
target of RM2bn p.a.; and (2) Steep increases in input costs.
We are Neutral on the construction sector. On one hand, we foresee
improved investors risk appetite for construction stocks following: (1)
The massive underperformance of the sector vis--vis the market in
4Q2009 and 1H2010; and (2) A better sector news flow and new Relative Performance To FBM KLCI
expectations on the heels of the recent announcement of the 10th
Malaysia Plan (10MP). On the other hand, certain negative elements
FBM KLCI
remain such as: (1) The still slow pace of the roll-out of public projects, a
highly competitive market and declining dominance of established players
in large-scale projects locally; and (2) The not-so-rosy outlook and
IJM Corporation
increased operating risks in key overseas markets.
Maintain Market Perform. Indicative fair value is raised by 3% from
RM4.88 to RM5.01 as we roll forward the base year for valuation purpose
from FY03/11 to FY03/12. Our indicative fair value for IJM is based on
16x fully-diluted FY03/12 EPS of 31.3sen, at a 2x multiple premium above
Joshua CY Ng
our 1-year forward target PER for the construction sector of 10-14x to (603) 92802151
reflect: (1) IJMs group earnings that are resilient as reduced construction joshuang@rhb.com.my
profits in the event of sharp increases in construction input costs will be
cushioned by higher plantation profits during a commodity price upcycle;
and (2) IJMs largely trouble-free position as it is not involved in any
major arbitration cases in the overseas market.

Please read important disclosures at the end of this report.

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 16 June 2010

Table 2 : New Jobs Secured Recently

When Contract Value IJMs 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 3: Earnings Forecasts Table 4: 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 (%) New orderbook secured 2.0 2.0 2.0
-12.8 49.1 -6.7 -1.8 (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

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The recommendation framework for stocks and sectors are as follows : -

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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Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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