Although IJM’s annualised 1HFY3/09 core earnings made up 97% of our forecast and 99% of consensus, the results were below expectations as 2HFY09 is likely to be weaker due to higher raw material costs for ongoing construction jobs. 1H revenue growth of 7.1% could have been stronger, if not for a 9% decline in construction revenue. However, core net profit rose by 10.3%, thanks to better margins. No dividends were declared, which was no surprise. We are cutting our FY09-10 forecasts by 10-12% in view of the weaker margins.
Maintain TRADING BUY with a lower target price of RM4.35. The flight to quality in the current uncertain climate will make IJM among the contractor of choice given its track record. The main re-rating catalyst is the likelihood of RM1bn-2bn worth of new jobs over the next 6-12 months.
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