Stock Name: IJM
Company Name: IJM CORPORATION BHD
Construction sector
Maintain overweight: Our conclusion from our review and tour of highway projects is that they are a medium- to long-term story and that projects related to the 10th Malaysia Plan (10MP) and the Economic Transformation Programme (ETP) will remain the highlight for the construction sector in 2H11.
Although the recent approvals for the New Pantai Expressway (NPE) extension and the West Coast Expressway (WCE) suggest that execution of build-operate-transfer (BOT) highway projects is making tracks, we do not discount the announcement of more details of highway projects during the tabling of Budget 2012 in October.
We think that the award of the mass rapid transit (MRT) project and light rail transit (LRT) Phase 2 will offer more excitement. We continue to 'overweight' the construction sector. IJM Corp Bhd replaces Muhibbah Engineering (M) Bhd as one of our top picks for the sector, the other being WCT Bhd.
We visited the recently-opened Kuala Lumpur-Kuala Selangor (KLKS) Expressway which spans 32km from Templer's Park near Rawang in the east of Selangor to Ijok near Kuala Selangor in the west. This is one of the interlinking highways that form the Kuala Lumpur Outer Ring Road (KLORR). This BOT project was completed about three weeks ago and the highway was opened to the public on June 23. It will only charge toll from Sept 1 onwards.
We have identified 19 highways planned under the 9MP and 10MP. Most are located in the Klang Valley, while some are concentrated on the east coast of Peninsular Malaysia. Some 26% are operational or under construction, 11% have not seen major progress, 11% have been approved while 47% are still at the planning stages. One highway that is targeted to come onstream in 2012 is the Eastern Dispersal Link (EDL) in Johor.
The approval of the extension of the NPE and the construction of the WCE earlier this year is likely to pave the way for the implementation of other BOT highway projects in 2H11 and beyond. The other six highways are largely urban and intra-urban highways with a distance of between 20km and 70km. Based on our checks, they are estimated to cost between RM2 billion and RM4 billion.
Implementation of highway construction/BOT jobs should continue to buoy construction activities over the next few years. Approvals for the extension of the NPE and construction of the WCE have kick-started the development of highway infrastructure from 2011 onwards and the RM7 billion to RM8 billion total estimated construction cost should create subcontracting opportunities. For other highways, all the contractors under our coverage could get a slice of the action given their expertise and track record. ' CIMB Research, July 5
This article appeared in The Edge Financial Daily, July 6, 2011.
Company Name: IJM CORPORATION BHD
| Research House: CIMB | Price Call: BUY | Target Price: 7.81 |
Construction sector
Maintain overweight: Our conclusion from our review and tour of highway projects is that they are a medium- to long-term story and that projects related to the 10th Malaysia Plan (10MP) and the Economic Transformation Programme (ETP) will remain the highlight for the construction sector in 2H11.
Although the recent approvals for the New Pantai Expressway (NPE) extension and the West Coast Expressway (WCE) suggest that execution of build-operate-transfer (BOT) highway projects is making tracks, we do not discount the announcement of more details of highway projects during the tabling of Budget 2012 in October.
We think that the award of the mass rapid transit (MRT) project and light rail transit (LRT) Phase 2 will offer more excitement. We continue to 'overweight' the construction sector. IJM Corp Bhd replaces Muhibbah Engineering (M) Bhd as one of our top picks for the sector, the other being WCT Bhd.
We visited the recently-opened Kuala Lumpur-Kuala Selangor (KLKS) Expressway which spans 32km from Templer's Park near Rawang in the east of Selangor to Ijok near Kuala Selangor in the west. This is one of the interlinking highways that form the Kuala Lumpur Outer Ring Road (KLORR). This BOT project was completed about three weeks ago and the highway was opened to the public on June 23. It will only charge toll from Sept 1 onwards.
We have identified 19 highways planned under the 9MP and 10MP. Most are located in the Klang Valley, while some are concentrated on the east coast of Peninsular Malaysia. Some 26% are operational or under construction, 11% have not seen major progress, 11% have been approved while 47% are still at the planning stages. One highway that is targeted to come onstream in 2012 is the Eastern Dispersal Link (EDL) in Johor.
The approval of the extension of the NPE and the construction of the WCE earlier this year is likely to pave the way for the implementation of other BOT highway projects in 2H11 and beyond. The other six highways are largely urban and intra-urban highways with a distance of between 20km and 70km. Based on our checks, they are estimated to cost between RM2 billion and RM4 billion.
Implementation of highway construction/BOT jobs should continue to buoy construction activities over the next few years. Approvals for the extension of the NPE and construction of the WCE have kick-started the development of highway infrastructure from 2011 onwards and the RM7 billion to RM8 billion total estimated construction cost should create subcontracting opportunities. For other highways, all the contractors under our coverage could get a slice of the action given their expertise and track record. ' CIMB Research, July 5
This article appeared in The Edge Financial Daily, July 6, 2011.
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