Surge in Data Center and Electrical Demand Boosts Analysts' Optimism for IJM

IJM is an investment holding company specializing in construction, infrastructure development, and property development, with a presence in Malaysia, India, the United Kingdom, and other countries. The company's stock price reached a yearly high in July at RM 3.760. So far this year, its share price has risen over 65%.

IJM has secured two contracts valued at RM561 million to construct data centers in Gelang Patah, Johor, and an industrial manufacturing facility in Batu Kawan, Penang. These contracts elevate IJM's year-to-date job wins to RM1.86 billion and increase its outstanding order book to RM7.9 billion.

HLIB Research highlighted the synergies of IJM's partnership with Woh Hup, noting that Woh Hup's DC construction experience and IJM's local market expertise and supply chain advantages, such as spun piles and IBS components, create a strategic advantage. This partnership could potentially enable IJM to secure more projects from Singapore-based DC developers, including TM and Singtel’s 200MW development. MIDF Research emphasizes IJM's internal supply chain capabilities, noting that while this is IJM’s first official data center project, it has previously supplied concrete spun piles to the sector. For FY24, 25% of its spun piles were supplied to projects including data centers, logistics warehouses, and E&E facilities. Such capabilities, including Smart IBS solutions, are expected to accelerate IJM's construction progress.

Kenanga is also positive about the contract wins, which align with its FY25 job win assumption of RM5 billion and notes that IJM’s outstanding construction order book stands at RM7.9 billion. Meanwhile, Sunway announced the sale of 64 acres of land in its Sunway City Iskandar Puteri (SCIP) township in Johor for data center development to Equalbase, generating RM380 million in sales proceeds. The transaction, expected to complete in about a year, is anticipated to contribute a land sale gain of RM213.1 million to future financial forecasts.

IJM Corp Bhd witnessed a dramatic increase in its net profit for the fourth quarter of the fiscal year 2024, with profits exceeding ten times the amount from the same period last year, reaching RM305.5 million. This leap was propelled by a significant rise in other operating income, which reached RM241.79 million. The company also experienced a robust increase in quarterly revenue, surging 32.6% to RM1.76 billion, though its infrastructure toll division did not contribute to this growth. Earnings per share for the conglomerate saw an ascent to 8.71 sen from the previous 0.66 sen. IJM announced dividends totaling eight sen per share for the fiscal year, maintaining the same total dividend payment as the previous year.

For the full fiscal year 2024, IJM Corp's net profit tripled to RM600.3 million, and its revenue rose by 29.5% to RM5.9 billion. CEO Lee Chun Fai is optimistic about the company's future growth prospects, citing a strong order book and a strategic focus on key growth sectors, positioning IJM for further project pipeline expansion.

MIDF Research maintains a BUY rating, anticipating IJM to be a key beneficiary of positive construction sector prospects. A strong pipeline of jobs is expected from the second half of CY24 onwards, including more civil job flows in addition to private jobs and industrial building projects. HLIB Research also maintains a BUY rating for IJM with an unchanged target price (TP) of RM3.64. The research institution pointed that trading opportunities are still seen in the stock, driven by potential contract wins and monetization news flow. Key catalysts include new contract wins, while risks involve unfavorable restructuring terms, prolonged high materials prices, and labor shortages.

In addition, Kenanga has a positive outlook on the construction sector. Significant revitalization is expected, backed by the roll-out of the RM45 billion MRT3 project in 2024/2025 and several flood mitigation projects reportedly worth RM13 billion. The vibrant private sector construction market is also underpinned by massive investments in new semiconductor foundries and data centers. IJM is reportedly eyeing work packages from various projects in East Malaysia and Indonesia.