CIMB reiterates buy call on IJM Corp, raises TP to RM5.55 (ext: Edge)

CIMB Research reaffirmed its trading buy recommendation on IJM Corporation Bhd at RM4.52 with a higher target price of RM5.55 from RM4.53 previously for a higher construction price earnings (P/E), higher land values in Penang and a lower 20% revised net asset value (RNAV) discount instead of 30%.

It said the company was even more upbeat on domestic prospects, especially on the outlook for the construction sector in 2009, as the new administration’s pump-priming agenda should lead to a pick-up in news flow on potential mega projects in the coming months.

CIMB said IJM might be in the running for nine contracts worth as much as RM9.4 billion in total, adding that the immediate boost to the company’s order book could come from a RM700 million hospital project in Putrajaya, adding that if successful, IJM would get at least half of the contract value.

However, IJM continued to see signs of weakness in the property market and expected industry prospects to remain challenging. “Although it is not looking for more landbank in Penang, it thinks that the Penang property market is more vibrant than Johor which has yet to see a boost from the Iskandar corridor,” said the research house, adding that overall, the scenario was positive for IJM.

“The group is vying for up to nine more new projects until 2010 when the current Ninth Malaysia Plan ends. Domestic jobs will be the key recovery factor for IJM’s construction division,” it said.

CIMB said there could also be more private finance initiative (PFI) projects for private sector players with good track records, strong execution abilities and solid balance sheets.