Stock Name: IJM
Company Name: IJM CORPORATION BHD
Research House: MAYBANK
IJM Corp Bhd
(April 4, RM6.45)
Maintain hold at 6.35 with target price RM6.50: Last Friday, the government gave the go-ahead to two toll concessions, which should positively boost IJM Corp's construction order book, which stands at approximately RM4.1 billion now. We estimate the order book could easily double. The impact on valuations cannot, however, be assessed in the absence of further information. We maintain our 'hold' call on IJM for now, with an unchanged RM6.50 realisable net asset value target price, which implies a 21 times 2011 earnings multiple.
Kumpulan Europlus Bhd's (K Euro) 64.2% subsidiary West Coast Expressway Sdn Bhd received a letter on April 1 from the Public Private Partnership (PPP) Unit of the Prime Minister's Department approving in principle the construction of the West Coast Expressway (Taiping-Banting) on a build-operate-transfer basis. The final approval is subject to further negotiations on the technical and financial terms, expected to be completed within six months. K Euro is a 25% associate of IJM Corp.
New Pantai Expressway Sdn Bhd (NPE) also received a letter from the PPP Unit on April 1, approving in principle the New Pantai Elevated Highway extension to Ampang.
The project will be privatised via a supplemental agreement to the original concession agreement dated March 26, 1996, and is subject to further negotiations on the technical and financial terms, to be concluded within six months. NPE is a 100%-subsidiary of IJM Corp.
The original construction value of the West Coast Expressway, when it was conceived at least a decade ago, was RM3 billion. The value should have risen substantially by now, considering the rise in construction material costs over the years. While the concession will be parked under K Euro, IJM Corp's construction unit is expected to secure the whole construction works.
The New Pantai Elevated Highway extension to Ampang could easily cost above RM1 billion, based on very preliminary assessments. Total construction value from the two projects is likely to be above RM4 billion.
The length of the construction period and when work on the two projects will start, which would impact near-term construction earnings forecasts, are unknown at this juncture.
Also, unknown is the internal rate of return for both concessions, which we believe is in the region of 12% to 15%. We are also unsure on traffic risk, and the potential sharing of such risk with the government, since infrastructure projects will be under taken via the PPP method as highlighted under the 10th Malaysia Plan. ' Maybank IB Research, April 4
This article appeared in The Edge Financial Daily, April 5, 2011.
Company Name: IJM CORPORATION BHD
Research House: MAYBANK
IJM Corp Bhd
(April 4, RM6.45)
Maintain hold at 6.35 with target price RM6.50: Last Friday, the government gave the go-ahead to two toll concessions, which should positively boost IJM Corp's construction order book, which stands at approximately RM4.1 billion now. We estimate the order book could easily double. The impact on valuations cannot, however, be assessed in the absence of further information. We maintain our 'hold' call on IJM for now, with an unchanged RM6.50 realisable net asset value target price, which implies a 21 times 2011 earnings multiple.
Kumpulan Europlus Bhd's (K Euro) 64.2% subsidiary West Coast Expressway Sdn Bhd received a letter on April 1 from the Public Private Partnership (PPP) Unit of the Prime Minister's Department approving in principle the construction of the West Coast Expressway (Taiping-Banting) on a build-operate-transfer basis. The final approval is subject to further negotiations on the technical and financial terms, expected to be completed within six months. K Euro is a 25% associate of IJM Corp.
New Pantai Expressway Sdn Bhd (NPE) also received a letter from the PPP Unit on April 1, approving in principle the New Pantai Elevated Highway extension to Ampang.
The project will be privatised via a supplemental agreement to the original concession agreement dated March 26, 1996, and is subject to further negotiations on the technical and financial terms, to be concluded within six months. NPE is a 100%-subsidiary of IJM Corp.
The original construction value of the West Coast Expressway, when it was conceived at least a decade ago, was RM3 billion. The value should have risen substantially by now, considering the rise in construction material costs over the years. While the concession will be parked under K Euro, IJM Corp's construction unit is expected to secure the whole construction works.
The New Pantai Elevated Highway extension to Ampang could easily cost above RM1 billion, based on very preliminary assessments. Total construction value from the two projects is likely to be above RM4 billion.
The length of the construction period and when work on the two projects will start, which would impact near-term construction earnings forecasts, are unknown at this juncture.
Also, unknown is the internal rate of return for both concessions, which we believe is in the region of 12% to 15%. We are also unsure on traffic risk, and the potential sharing of such risk with the government, since infrastructure projects will be under taken via the PPP method as highlighted under the 10th Malaysia Plan. ' Maybank IB Research, April 4
This article appeared in The Edge Financial Daily, April 5, 2011.
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