IJM Corporation’s 4QFY16 net profit came in at RM44.2m (-82.7% QoQ, -55% YoY), which was within our expectation but below consensus. Current quarter revenue was down 19.1% to RM1.2bn due to lower contributions from property development, manufacturing & quarrying, plantation and infrastructure divisions. PBT decreased by 45%, which was due mainly to net unrealized forex losses of RM65m and also lower contribution from all core businesses. Current year’s net profit was higher by 13.4% YoY mainly due to one-off gains from disposal of equity interests in highways in India for a combined value of RM302m. Maintain Neutral and SOTP-derived TP of RM3.40. With the limited upside, IJM is kept at Neutral for now.

• Healthy orderbook. With the recent MRT2 contract win, the Group’s outstanding orderbook is estimated at c.RM8.5bn, which would underpin its earnings for the next 3-4 years. Current quarter and YTD revenue rose by 42.5% and 48.9%% YoY respectively due to increased contribution from projects that were secured last year. However, PBT was lower due to forex losses of c.RM4.7m for the year. Tender book includes LRT3, Pan Borneo and highways such as SUKE and DASH.
• Lackluster property sales. Property sales continued to be weak in the current difficult trading environment. Revenue and PBT both dropped by 50.4% and 96.5% respectively during the quarter. The drop in revenue and PBT was again attributed to lower sales recorded, lower margins and completion of certain projects last year. We believe that it will be challenging for the Group to match the RM1.7bn sold in FY15. Unbilled sales still stood at c.RM1.7bn. Separately, IJM hopes to complete the sale of a 33-acre plot of The Light Phase 3 land to the IJM-Perennial JV in FY17.
• Other divisions. Plantation revenue for the quarter declined by 13.1% YoY due to lower CPO prices and sales volume. FFB production was also adversely affected by prolonged dry weather in its Sabah plantation. As for infrastructure, revenue dropped by 20% due to disposal of its 70%-owned Swarna Tollway which yielded a one-off gain of RM133m previously. Its port concession performed better with higher cargo revenue recorded. The infrastructure division profits were mainly buoyed by one-off gains totaling RM302m from disposals and re-measurement gains which saw its profits jump by 13x YoY. Unrealized forex losses for infrastructure division were RM86.5m YTD as compared to RM95.2m in FY15.

Source: PublicInvest Research - 27 May 2016