IJM Corporation (RM4.86; Buy; Price Target: RM6.00; IJM MK)
New contracts in Sarawak
IJM has received 2 Letters of Acceptance of tender for Murum Access Road, Sarawak (Packages A1 & B2) from the Jabatan Kerja Raya, Sarawak for a total contract value of
RM246.7m. Package A1 involves earthwork, construction of 3 minor bridges, culverts, drains and pavement works for 20km of road at a contract sum of RM125.2m. Package B2 involves
earthwork, rock excavation, construction of 2 minor bridges, culverts, drains and pavement works for 10.5km of road at a contract sum of RM121.5m. The construction period for both packages is 24 months.
These projects are part of the broader RM224bn SCORE development in Sarawak and specifically are the access roads leading to the dam being constructed. The total contract value of RM246.7m accounts for 16% of our RM1.5bn order win forecast for FY11 (below IJM’s target of RM2bn). Assuming conservative margins of 6%, pretax profit generated over the 2 year period is RM15m or c. 1 sen per share. This contract will also lift IJM’s orderbook by 7% to RM3.8bn. More importantly, this win is a major positive because Sarawak is a state dominated by local state contractors and it may be a start to more jobs in the state for an established contractor like IJM.
Reiterate our Buy rating on IJM with a price target of RM6.00 based on SOP.
source: HWDBS Vickers