This article first appeared in The Edge Malaysia Weekly on August 28, 2017 - September 3, 2017

Despite the prevailing damp sentiment brought about by sluggish oil prices, the weak ringgit and general turbulence in the global economy, IJM Corp Bhd sailed through yet another year.

Despite challenging times, it still outperformed its construction industry peers with a compound annual growth rate of 23.5% on profit after tax between FY2013 and FY2016.

IJM bucked the trend and reported 65% growth in its profit after tax to RM793.58 million in FY2016 from RM480.9 million in FY2015. In FY2014, PAT was RM829.59 million.

The group’s FY2016 earnings were partly boosted by extraordinary gains arising from the sale of its shares in Jaipur Mahua Tollway Pte Ltd and Swarna Tollway Pte Ltd, totalling RM301.9 million.

Its pre-tax profit came in at RM1.15 billion, compared with RM1.01 billion the year before.

Excluding the non-recurring items, IJM’s core pre-tax profit stood at RM848.32 million, representing a 17% y-o-y dip, which is respectable, considering the challenging operating environment, says IJM CEO and managing director Datuk Soam Heng Choon in the group’s annual report.

Annual revenue improved 20% y-o-y to RM6.92 billion, brought about by the completion of some property projects, increased delivered tonnage of piles and quarry products and higher crude palm oil prices.

Segmentally, the construction division was the largest revenue contributor, accounting for 28.4% of group revenue, followed by infrastructure (22.4%), property development (22.3%), manufacturing and quarrying (16.9%), plantation (9.6%) and infrastructure.

One segment that stood out was the infrastructure division, by virtue of the gains arising from the stake sales and continued traffic growth in its Malaysian toll road concessions and higher cargo revenue at Kuantan Port.

As at end-FY2017, the group’s construction division had an outstanding order book of RM8.5 billion.

On top of that, IJM secured its first contract for FY2018, namely the RM450.9 million contract for the construction of UOB Tower 2, bringing its order book close to the RM9 billion mark, which is a historical high.

The group has an order book replenishment target of RM3 billion for FY2018 and is aiming to participate in mega infrastructure projects to be rolled out under the 11th Malaysia Plan, such as the Light Rail Transit 3 (LRT 3), Pan Borneo Highway and East Coast Rail Line (ECRL).

Meanwhile, its industry division stands to benefit from the heightened construction activities as well, while its property division has RM1.7 billion in unbilled sales, providing visibility for the next three to four years.

The group expects the plantation division to see higher crop production from its Indonesian operations as more areas come into production age, while the infrastructure division should continue to see positive contributions from its toll operations and recovery in throughput at its port operations.

With the gargantuan RM55 billion ECRL, which is slated to link Port Klang in Selangor to Pengkalan Kubor in Kelantan, IJM is likely to benefit from not only the many parcels of construction jobs but also the heightened traffic at Kuantan Port.

Kuantan Port Consortium Sdn Bhd, which is 60% owned by IJM, has a 30-year concession to manage, operate and develop Kuantan Port.

At the Malaysia-China Kuantan Industrial Park (MCKIP) located in the vicinity of the port, investments in excess of RM10 billion have been made to develop, among others, an integrated steel mill (RM4.2 billion) with an annual production capacity of 3.5 million tonnes. Malaysia-China Kuantan Industrial Park Sdn Bhd, a 51:49 joint venture between a Malaysian consortium and a Chinese consortium, is the master developer of the MCKIP. IJM has 40% equity interest in the Malaysian consortium.

IJM’s bright prospects are indeed exciting, what with the momentum of Malaysia’s booming construction industry and the projected growth in the East Coast of Peninsular Malaysia.
 

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