CGS International has maintained its “Add” recommendation on IJM Corporation Bhd with a target price of RM3.20, saying the group’s proposed listing of its construction business could unlock significant shareholder value, although achieving a RM5 billion valuation will require stronger earnings growth and improved margins.
The research house’s comments follow reports that IJM has appointed investment banks to explore the listing of its construction division, which is targeted for completion by the end of 2027. IJM subsequently confirmed it is assessing the feasibility of a potential listing but said the proposal remains subject to further evaluation.
According to CGS, the proposed initial public offering (IPO) is expected to involve IJM’s Malaysian and Singaporean construction operations, which had a combined order book of RM9.5 billion as at March 2026 and are targeting RM6 billion in new contract wins for FY2027.
The research house noted that the listing forms part of IJM’s broader value realisation strategy, alongside toll road monetisation and the group’s planned exit from India, with management targeting RM3 billion in shareholder distributions over the next three years.
RM5 billion valuation achievable with stronger earnings
While market reports suggested the construction unit could be valued at around RM5 billion, CGS said such a valuation would require both higher profitability and stronger earnings growth than the business currently delivers.
It estimates that IJM’s construction business is presently worth around RM1.6 billion under its sum-of-parts valuation.
To justify a RM5 billion valuation, the research house believes revenue would need to roughly double from RM3.6 billion in FY2026 to about RM7.2 billion by FY2028, while maintaining a sustainable net profit margin of around 4%.
Applying an estimated price-to-earnings multiple of 18 times, CGS said such financial performance could support an equity valuation of approximately RM5.1 billion.
The research house also expects the listing to coincide with favourable industry conditions, including sustained demand from Malaysia’s expanding data centre sector, more semiconductor-related projects and the rollout of major government infrastructure developments.
In addition, CGS believes pretax margins would need to improve towards the upper end of the company’s historical 6% to 9% range. The construction division recorded a pretax margin of 6.8% in FY2026, up from 5.0% a year earlier.
Shareholder returns remain key attraction
CGS said the more significant aspect of the proposed restructuring is IJM’s commitment to return RM1.2 billion in cash to existing shareholders as part of its broader capital management programme.
At current share prices, the proposed cash distribution represents an estimated 14% yield, making it one of the key attractions for investors.
Media reports have suggested IJM could retain a 70% stake in the listed construction entity, with 5% distributed in specie to existing shareholders and the remaining 25% offered as public float, although CGS noted the structure remains preliminary and could change.’
Positive long-term outlook
CGS said it continues to favour IJM for its established construction franchise, integrated spun piles business and ongoing efforts to unlock shareholder value.
The research house added that faster execution of its value realisation initiatives and stronger property sales could provide further upside, while slower contract awards and rising raw material costs remain key downside risks.
