- Maintain BUY on IJM
Corp, with an unchanged fair value of RM6.84/share, based on the sum-of-parts
methodology.
- In an announcement
to Bursa Malaysia, IJM revealed that the Public Private Partnership (PPP) unit
of the Prime Minister’s Department has decided not to proceed with IJM’s
proposal for the extension of the New Pantai Expressway (NPE).
- Recall, IJM had
last April received an approval-in-principle from the federal government to
embark on this project that entails a 10km-long extension of the existing NPE. The contract was
initially estimated at ~RM1bil.
- The existing NPE
route is about 19.6km-long, starting from Subang Jaya (west end) and ending in
Bangsar (north end).
- The extended
stretch was supposed to be mainly constructed on elevated grounds – starting
from the Bangsar end of the existing route.
- It was reported
earlier that a supplemental agreement was to have been signed last October to
consummate the terms of the deal.
- We expect this
latest development to be a slight negative newsflow-wise, although it does not
come as a complete surprise to us. Furthermore, IJM has said that it would appeal
against the decision – with a revised alignment.
- This is crucial, as
the existing highway extension would punch through densely populated areas
within the city centre, where there are already a number of new highway/rail
projects that has been mooted – including the Sg.Buloh-Kajang MRT.
- We make no changes
to our earnings assumptions, as we had previously not included the NPE
extension project into our new order book assumptions for FY13F.
- Backed by a healthy
order book of ~RM4bil, IJM is still lining up a few more project bids,
including the RM7bil West Coast Expressway.
- This comes just
after the local press reported earlier this month that the group has secured a
RM120mil contract to build a special maintenance depot for the Seremban railway
station.
- We believe the bulk
of the negative newsflow has already been priced-in at current levels (ytd:
-8%). A near-term catalyst could come from the upcoming launch of its Rimbayu
development near Kota Kemuning slated for August (Phase 1: 250 units).
Source: AmSecurities
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