· IJM Corporation Berhad (IJM) is one of Malaysia's largest diversified construction and infrastructure conglomerates, ranked among the top large-cap contractors by market capitalisation, and is recognised for its track record delivering landmark projects.
· Conglomerate-discount unwind already underway. The RM3bn Value Realisation programme comprises a planned IJMC construction-arm listing, toll-concession monetisation, and full India exit.
· Data centre-led Construction is the emerging growth engine. A RM14.5bn order book and an RM18bn tender pipeline are anchored by hyperscale wins including the Elmina Business Park data centre, the ASRS semiconductor warehouse in Kulim, and the Intuitive Surgical facility in Batu Kawan – 55% of the Malaysian book is now industrial and data-centre work.
· We initiate coverage on IJM with a BUY recommendation and TP of RM3.48, based on a sum-of-parts valuation, along with a three-star ESG rating.
Key Investment Highlights
Long-term earnings visibility. IJM's outstanding order book of RM14.5bn will keep the Group busy well into FY29. With an order book-to-revenue coverage ratio of 2.1x against FY26 Construction revenue, earnings visibility extends comfortably beyond the typical 1 to 2-year window most contractors offer. IJM is further equipped with a tender book worth RM18bn. Relative to management's FY27 new-order target of RM9bn (RM6bn Malaysia, RM3bn overseas), the Group has already secured RM1.8bn in new wins year-to-date, keeping it on track to sustain order book growth into FY28.
Robust project pipeline. IJM is well-positioned for Malaysia's data centre and industrial building boom, with 55% of its Malaysian order book now tied to this segment. Beyond its own pipeline, IJM Land's RM1.96bn JV with MOF Inc./Southern Catalyst to develop an industrial park in Sedenak extends exposure to the same corridor, while UK associate JRL (50%-owned) and Singapore associate Hexacon (45.5%-owned) add a further RM5.0bn and RM2.2bn to the order book. These initiatives, together with the planned standalone listing of the Construction arm, IJMC, targeted for Q3 2027, should enhance both earnings visibility and the market's willingness to price Construction on its own merits.
Vertical integration and niche technology, not headline margins, are IJM's edge. Unlike smaller pure-play contractors that command premium net margins through disciplined project selection, IJM's Construction PBT margin (c.4% in FY26) reflects its scale and diversified project mix rather than pricing power alone. IJM's genuine differentiator instead sits in its Industry division, IJM's highest-margin segment at 16.8% PBT margin, built on in-house spun pile manufacturing that doubles as one of Malaysia's largest external pile suppliers. This vertical integration captures margin peers pay away to third parties and insulates Construction from input cost inflation, while proprietary "bubble deck" precast technology, used on RTS Link projects with only one small competitor offering a comparable product, adds a further defensible niche.
Valuation and Recommendation. We initiate coverage on IJM with a BUY recommendation and a target price of RM3.48, based on a sum-of-the-parts valuation combining PE multiples for Construction (22.0x FY27F CNP), Manufacturing & Quarrying (20.0x), and Port (20.0x, 60% attributable), a DCF equity value for toll-way concessions, a 50% discount to RNAV for Property, zero value for Indian concession assets, and market value for listed associate stakes, yielding a gross asset value of RM16,747.7m and an equity value of RM12,708.7m after net debt, or RM3.48 per share.
Risk. Inability to convert the tender book into confirmed contracts, construction input cost inflation running ahead of expectations, and execution risk on the Value Realisation programme underpinning the re-rating thesis.
Disclaimer
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Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.071829 | 4.100395 |
| EUR | 4.715419 | 4.720186 |
| CNY | 0.608798 | 0.609416 |
| HKD | 0.519063 | 0.522709 |
| SGD | 3.197837 | 3.220412 |