IJM Corporation’s long-term value creation strategy remains firmly on track, underpinned by its planned construction arm listing, toll road monetisation programme and gradual exit from India, according to MBSB Research, which maintained its “Buy” recommendation with an unchanged target price of RM2.82.
The research house said the conglomerate’s proposed RM3 billion shareholder value realisation plan over the next three years remains a key investment catalyst, translating into a cumulative dividend distribution of approximately 83 sen per share, equivalent to an implied shareholder yield of around 40%.
Sustainability-linked sukuk
MBSB Research noted that IJM’s wholly owned subsidiary, New Pantai Expressway Sdn Bhd (NPE), has issued an initial RM54 million Sustainability-Linked Sukuk (SLS) under its RM1.42 billion Islamic Medium-Term Notes (IMTN) programme.
The proceeds will help finance the RM1.7 billion New Pantai Expressway Extension (NPE2) project.
The initial issuance represents about 3.8% of the total sukuk programme and is believed to be the world’s first sustainability-linked sukuk issued for a highway project.
According to MBSB Research, the financing not only diversifies IJM’s funding sources but also strengthens the group’s environmental, social and governance (ESG) credentials by incorporating sustainability performance targets into the financing framework.
Toll monetisation remains key catalyst
The research house believes the sukuk issuance supports project execution ahead of IJM’s broader toll road monetisation strategy, which is expected to contribute RM575 million, or approximately 19.2%, of the group’s RM3 billion shareholder value plan.
Management intends to monetise its wholly owned toll concessions comprising the New Pantai Expressway (NPE), BESRAYA and LEKAS, either through a business trust structure or bilateral arrangements.
IJM is also evaluating the inclusion of the West Coast Expressway (WCE) after its expected completion in the first quarter of calendar year 2027, even before the concession reaches maturity.
MBSB Research expects NPE2 to enhance the overall valuation of IJM’s toll portfolio by improving connectivity between its highway assets and boosting long-term traffic flows.
Construction In progressing
The brokerage said construction of NPE2 remains on schedule, with overall project completion reaching 6%.
Progress has been supported by the use of piled embankment construction techniques, which have accelerated execution while helping to manage project timelines.
Management also indicated that rising material costs linked to geopolitical tensions in the Middle East have had only a limited impact, as a significant portion of construction packages had already been awarded before recent cost escalations.
The 15.9-kilometre elevated highway and connecting ramps will improve integration between the NPE, BESRAYA and the upcoming Lingkaran Ipoh-Kuala Lumpur Expressway (LIKE).
Traffic volume is projected to reach approximately 40,000 vehicles per day during the first year of operations, with annual growth of between 2% and 3%, providing a steady earnings contribution to IJM’s toll concession business.
Positive outlook maintained
MBSB Research left its earnings forecasts largely unchanged and maintained its RM2.82 target price, based on 22.2 times FY2027 forecast price-to-earnings, representing around 0.5 standard deviation above IJM’s five-year historical average valuation.
The research house said IJM’s value creation strategy continues to revolve around three major initiatives—the proposed listing of its construction business, toll road monetisation and progressive divestment from its India operations—which together are expected to unlock significant shareholder value over the coming years.
