IJM appointed main contractor for WCE

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IJM Corp Bhd
(Dec 15, RM6.42)
Upgrade to “buy” with an unchanged target price of RM7.20.
The IJM Construction Sdn Bhd (IJMC)-Kumpulan Europlus Bhd (KEB) joint venture (JV) recently accepted the letter of award (LoA) from West Coast Expressway Sdn Bhd, appointing the JV the engineering, procurement and construction contractor to undertake and complete the construction works for the West Coast Expressway (WCE) from Taiping to Banting for a fixed sum not exceeding RM5 billion.

Pursuant to the LoA, the JV shall award to IJMC the WCE construction works for packages 3,4,5,8 and 9 at a cost not exceeding RM2.83 billion.

The construction period is five years. We are not surprised with the JV appointment as a main contractor as it was announced by KEB that the government had given the nod for the appointment in May this year.

We opine the above appointment could lead to an open tender stage for the remaining RM2.2 billion packages of the WCE project in the coming weeks and the contract award stage in the following months. We do not rule out the possibility of IJM Corp participating in the other work packages. Winning the other work packages could provide an earnings surprise for IJM Corp in terms of higher construction job replenishment and more demand for its industry products.

We make no changes to our earnings forecasts. Going forward, we expect to hear more positive news flow on the WCE development. On its recent share price weakness, we upgrade IJM Corp to “buy” with an unchanged target price of RM7.20. We advise investors to take opportunity to accumulate this stock. — MIDF Research, Dec 15


This article first appeared in The Edge Financial Daily, on December 16, 2014.