IJM Corporation & WCT, 17 Mar 2015

IJM Corporation :

Entering a new growth chapter  BUY

We maintain our BUY call on IJM Corp with an unchanged fair value of RM8.15/share, pegged at an unchanged 10% discount to its sum-of-parts value. In a filing to Bursa Malaysia, IJM announced two key changes to its senior management. Dato’ Soam Heng Choon will replace Dato’ Teh Kean Ming as group CEO & managingdiirector (MD) with effective from 6 April 2015.

In his place, Lee Chun Fai has been appointed as the group’s new deputy CEO/MD, also from 6 April onwards. Dato’ Soam has been with the IJM group since 1989. Apart from being the MD of IJM Land since October 2006, Soam was made the group’s deputy CEO/MD in June 2013.     

On the other hand, Lee has been with the group since 1995. The local press reported that he was head of corporate strategy and investment in July 2012 before being placed in charge of the infrastructure division. More importantly, we believe the latest changes are reassuring and provides management continuity, as the group enters a new growth phase.

This comes at the time when IJM is on track to secure a record orderbook of RM7bil by early-FY16F. We continue to rate IJM as our top-large cap construction pick for its well-rounded earnings; backed by improving prospects across most, if not all of its divisions. Also, we expect IJM’s proposed privatisation of its property arm, IJM Land, to be completed within the next one to two months.

Other potential re-rating catalysts include:

(i)            Upside from additional concession income via the Kuantan Port Expansion (not in our forecast for now);

(ii)           Balance of works for the Kuantan Port Expansion (>RM1bil);

(iii)          Balance of works for the West Coast Expressway (~RM2.2bil); and

(iv)         Possible inclusion into the FBM KLCI 30 Index as one of the five stocks on the current reserve list (next review in June). Its foreign shareholding level stood at c.40% as at 30 January 2015. 

Others :

WCT : Fresh capital required   HOLD