Key take-aways; maintain BUY
We visited IJM’s new fully automated Industry 4.0 Industrialised Building
System (IBS) plant last week which produces IBS precast products to be
supplied to its in-house property projects and prospective clients. With
the cost of using IBS being almost comparable with conventional
construction, a clear benefit is the time saved. We make no change to
our earnings forecasts. BUY with an unchanged MYR2.05 RNAV-TP.
New 500,000 sqm capacity plant
IJM’s new IBS plant, located in Bestari Jaya (in Kuala Selangor), started
commercial production in Nov 2021 with the Hotayi Electronic Factory in
Batu Kawan, Penang as its first project. IJM’s investment is just above
MYR100m over 3 years from 2018 with the plant construction having
completed in Nov 2021. The adoption of the IBS system will enable IJM to
deliver end products that are of higher quality and precision.
Benefits of the IBS system
The IBS system reduces reliance on foreign workers and help to improve
on safety issues as the construction components are manufactured offsite and site work is just installation. For IJM’s IBS plant, steel waste
which is not reused or recycled is less than 1%, thus the IBS system helps
to reduce the burden on the environment. With the cost of using IBS
being almost comparable with conventional construction, a clear benefit
is the time saved, thus quicker project delivery to its clients.
Maintaining earnings estimates
Over time, IJM’s new IBS plant will help to contribute to earnings of its
Industry division which had, in turn, contributed 11% to group pre-tax
profit in 3QFY22. With the cost of investment – at just above MYR100m –
being small on a relative basis, group earnings should be able to absorb
the fixed cost. We make no change to our earnings for now.