IJM Construction recent wins of RM1b, to build a hospital in Kapar and an office tower in Shah Alam for the Inland Revenue Board is expected to bode well for the order book adding significantly to its earnings.
There is the RM831m design-and-build turnkey construction contract for a government hospital in Kapar that will house 312 beds, IJM’s share of the net earnings, assuming a 5% margin, would be RM24.9m, or about RM6.2m a year until its FY27. And the LHDN project worth RM150.8m to erect an 18-storey building in Shah Alam. The project will also commence in Nov-22, to be completed in three years. Again, projecting a 5% net earnings margin, this would bring in about RM2.5m of earnings to IJM annually until FY26.
In this aspect, MIDF is maintaining earnings estimates for FY23E and FY24F as the new job wins are in line with the expectations. Target price is RM2.18, which was arrived by pegging the group’s FY23 EPS of 10.6sen to its three-year mean PER of 20.6x.
The Kapar Hospital project adds another feather to IJM’s cap for healthcare projects, making it a household name in building hospitals. It previously constructed the National Cancer Institute in Putrajaya, Putrajaya Hospital nd Institut Jantung Negara (IJN), among others. MIDF also expect IJM to be among the front runners for packages CMC301 or CMC302 of the upcoming MRT3, which could come up to RM2.79b and RM13.94b respectively, given its vast experience in rail projects. Results are expected to be announced by the end of 2022, likely after the 15th General Election
