Reviving growth prospects post FY22
? FY3/22 results were in line despite one-offs; core net profit fell 45% yoy.
? Post the results, there is now greater clarity on MRT 3 tenders, highway deal
timeline (within 2HCY22) and land sale plans to enhance cash.
? Add rating intact with higher TP (lowered RNAV discount to 10%).
4QFY3/22 hit by one-off impairments; still profitable at core level
IJM Corp’s 4QFY6/22 net profit of a mere RM1m was largely the result of several negative
one-off charges. The two main items were: 1) RM66m impairment on the value of industrial
land related to the Malaysia-China Kuantan Industrial Park, MCKIP, and 2) RM77m
impairment on highway assets being the Lekas Highway (Malaysia) and a toll highway in
India, mainly relating to weakness in traffic volume during lockdowns. Stripping these out
and other items, we arrive at a core net profit of RM128m, 28% lower than 4QFY3/21
(+25.1% qoq on higher EBITDA margin). The main drag in the yoy decline in core net profit
was the higher tax rates due to a larger proportion of impairments in 4QFY22 that was nontax deductible. At the revenue level, the -9% yoy and -2.8% qoq contractions were in line
with the impact of the various lockdowns in CY21, which affected all business divisions.
The group declared a final DPS of 4 sen. The full-year DPS of 21 sen (above our forecast
of 17 sen), includes the 15 sen special dividend from the sale of IJM Plantations.
Full-year FY3/22 results were in line; core net profit fell 45% yoy
Excluding the one-off items, FY3/22 core net profit of RM178m was in line at 102-104% of
our and consensus full-year forecasts. Full-year revenue of RM4.4bn was also within
expectations, with the industry division’s (manufacturing of piles and quarrying) 24% yoy
revenue growth mitigating the 21% yoy fall in construction and weaker overseas property
sales. Construction pretax profit fell 12% yoy due to the three quarters of productivity
disruptions from various lockdowns in CY21. Property development core pretax margin
(ex-RM66m impairment) only slipped 1% pt yoy to 13% in FY22 and is likely to stabilise at
these levels in FY3/23F as the impact from rising building material cost since end-CY21 is
still manageable over the next 12 months, as guided during the results conference call. We
have not seen a full recovery in the revenue and earnings for ports and highway assets
(infrastructure division). 4QFY22 data show that highway traffic at Lekas and Besraya
highways rose above pre-pandemic levels while New Pantai Expressway’s (NPE) traffic is
near pre-pandemic levels. Overall, FY3/22 core net profit declined 45% yoy on lower
EBITDA margin, higher associate losses (Hexagon, Singapore) and higher tax rates.
MRT 3, highway deal and asset sale; Add retained with higher TP
We maintain FY23-24F EPS and introduce FY25F numbers. Post-conference call, we turn
more optimistic on MRT 3 civil works tenders, clearer highway deal timeline (within
2HCY22) and RM600m land sale plans to enhance cash (key potential re-rating catalysts).
We raise TP to RM2.09 (narrowing RNAV discount from 20% to 10%) to reflect stronger
sentiment for the share price. Our Add rating is intact. Downside risk: weaker earnings.