IJM earnings visibility poised to strengthen

PETALING JAYA: IJM Corp Bhd is expected to post stronger earnings and capital returns moving forward, mainly buoyed by a visible earnings recovery from the financial year 2026 (FY26) trough, improving construction earnings quality and the commencement of its RM3bil value-realisation programme.

In initiating coverage on IJM, BIMB Securities Research said these supporting factors, coupled with the group’s construction arm’s proposed listing and asset monetisation will also provide a pathway to narrow IJM’s longstanding conglomerate discount.

In context, BIMB Research said FY26 marked the earnings trough with a visible recovery beginning in the first quarter of FY27 (1Q27), while industrial projects will underpin stronger construction growth, faster execution and margin expansion.

The management’s three-year RM3bil shareholder-distribution programme is IJM’s principal re-rating catalyst.

The group has resold its 142.4 million treasury shares for RM385mil and declared a 10-sen special dividend.

Furthermore, the proposed 3Q27 listing of IJM’s Malaysian and Singapore construction operations is the largest component, with an indicative RM1.2bil distribution, and further proceeds should follow from toll monetisation and the India exit.

Investor engagement has also stepped up with a 1Q27 briefing, whereas previously contact occurred half-yearly. BIMB Research also highlighted that construction is becoming a higher-quality earnings engine with IJM’s RM14.5bil construction order book providing approximately 4.1 times FY26 revenue coverage.

More importantly, the composition has shifted towards higher-value industrial buildings, which account for 55% of the RM7.2bil Malaysian order book.

These projects including data centres (DCs), semiconductor facilities and advanced-manufacturing plants, typically offer shorter execution periods and better margins than conventional building and infrastructure contracts.

At the same time, property remains a core pillar of the group, although FY26 was an unusually weak year, said BIMB Research.

The deterioration reflected weaker property sales, the absence of the sizable Penang land-sale contribution recognised in FY25, elevated operating and incubation costs associated with investment properties and new developments in Malaysia and the United Kingdom, as well as foreign-exchange losses and inventory impairment.

Strategically, the research house noted that IJM appears to be shifting away from an emphasis on large-scale township development towards a more selective mix of residential, commercial and investment-property assets.

The group is also progressively rationalising its overseas exposure, particularly in India, while continuing to develop longer-dated UK opportunities through its network rail-related joint venture.

On IJM’s industry division, BIMB Research describes it as one of the group’s most consistent businesses and increasingly positions it to benefit from the same structural themes supporting the construction division.

Its strategic relevance has also increased as IJM’s construction pipeline becomes more concentrated in DCs, industrial buildings and infrastructure.

In addition, IJM holds an infrastructure portfolio that includes toll-road concessions and Kuantan Port.

The toll portfolio comprises mature domestic concessions including Sungai Besi Expressway and Kajang-Seremban Highway, together with IJM’s exposure to the West Coast Expressway and selected overseas concessions.

These assets provide recurring cash flows, although reported earnings can fluctuate due to amortisation, financing costs, traffic ramp-up and foreign-exchange movements, the research house said.

Kuantan Port, in which IJM holds an effective 60% interest, is a strategic bulk-cargo gateway serving customers including Alliance Steel and other industrial operators in the Malaysia-China Kuantan Industrial Park ecosystem.

Infrastructure earnings weakened materially in FY26.

Kuantan Port cargo throughput meanwhile declined to approximately 20.6 million tonnes from 24.3 million tonnes in FY25, reflecting major maintenance undertaken by its key customer, Alliance Steel.

The disruption reduced revenue and profitability, although the underlying port infrastructure and customer base remain intact, BIMB Research pointed out.

The research house has a “buy” call on the stock with a target price of RM3.47, implying 22.2% upside and attractive dividend returns.