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Saturday, May 10, 2008

IJM Corp in advanced talks for RM5b jobs

IJM Corp Bhd, which has a construction order book of RM6.5 billion, is believed to be in advanced stages of negotiations for an additional RM5 billion worth of construction work.

Half of this is for overseas work, Credit Suisse said in a report after meeting the company's management.

In addition, the construction and property development group is still in the running for a RM4 billion inter-state water transfer project, it said.

Credit Suisse maintained its "outperform" recommendation on IJM stock, but lowered its target price by 10 sen to RM8.30.

This suggests a 37 per cent upside from the closing price of RM6.05 yesterday.

At least 12 other research firms also have positive calls on the stock.

Credit Suisse also cut IJM's net profit forecast marginally, by one per cent to three per cent, for this fiscal year right up to 2010 to allow for a slightly lower construction profit margin.

This is because IJM's management had indicated that cost-inflation, particularly for steel, had caused some erosion in construction profit margin.

"However, we expect the potential impact to be merely RM20 million to RM25 million.

"Management expects sustainable construction pre-tax profit margin of over eight per cent in the longer term," the foreign research house said in its report on Thursday.

"Management also said that half of IJM's construction order book, currently at RM6.5 billion, has cost-escalation clauses that allow for cost-inflation to be passed on to clients," it added.

IJM is expected to release its results for the financial year ended March 31 2008 on May 27.

Last year, it made a net profit of RM194.3 million.

IJM is an attractive stock because its property restructuring, which includes a capital repayment of 50 sen a share, is expected to be completed in the third quarter of this year.

"We understand that management also plans to divest some of its low-yielding property assets and Indian toll concessions.

"Cash raised could be distributed as dividends," it added.

By New Straits Times

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