TA Research said investor focus is set to shift towards the IJM management’s ability to execute its two-year strategic plan to unlock the substantial embedded value within the group.
The research house noted that IJM’s share price has come under pressure recently, declining by about 12% over the past three months as the takeover premium unwound.
“We believe share price performance will now hinge on tangible delivery of its strategic initiatives, which could help restore investor confidence and narrow the prevailing valuation discount,” it said in a note today.
At the time of writing, IJM’s shares were down six sen or 2.6% at RM2.26, valuing the group at RM8.24 billion.
Sunway’s takeover offer for the construction and infrastructure group lapsed early last month after failing to obtain more than 50% of the voting shares. The offer was launched on Jan 12 to acquire IJM at RM3.15 per share, in a deal that valued IJM at about RM11 billion.
Among the value-unlocking initiatives that IJM is mulling include a potential listing of its construction arm, an exit from its India businesses, and sale or listing of its toll road assets.
TA said the planned listing of its construction arm, IJM Construction Sdn Bhd, will primarily comprise its Malaysia and Singapore order book exposure while excluding its UK operations under JRL Consortium (JRL).
However, it said investors may seek greater clarity on the post-listing operating structure, particularly the delineation between IJM Construction and JRL’s UK operations.
TA believes a separately listed construction entity could drive meaningful shareholder value creation, supported by IJM’s direct exposure to the Malaysia and Singapore infrastructure markets. IJM is targeting the listing by end-2027.
Exiting the India market
TA has a positive view on IJM’s plan to exit the India market, which encompasses its property development, construction, and toll-road concession businesses.
It said the move reflects the management’s intention to streamline its portfolio and sharpen its focus on core markets with stronger earnings visibility and more favourable risk-return dynamics.
“Historically, IJM’s India operations have faced persistent challenges, including margin volatility, elevated execution risks and regulatory complexities,” it noted.
It said the divestment could unlock capital tied up in relatively lower-return assets and redeploy the resources towards higher-growth and better-margin opportunities, particularly in Malaysia and Singapore.
Monetising matured assets
IJM is also exploring opportunities to monetise its mature concession assets, including the Besraya and NPE highways, should attractive valuations emerge.
“We view this initiative positively, as these assets have largely entered a mature cash flow phase, making them suitable candidates for capital recycling initiatives.
“Potential monetisation could unlock substantial embedded value, strengthen balance sheet flexibility, and provide additional firepower for reinvestment into higher-growth segments,” it added.
Concurrently, the management intends to continue rationalising non-core landbanks and redeploy proceeds into strategically located and higher-value development land, TA said.
TA maintained its “buy” call on IJM but lowered its target price to RM3.05 from RM3.46 per share previously.
“We like IJM for its position as the front-runner for large-scale infrastructure projects, i.e. Penang LRT and Nusantara civil servant housing projects, and growing presence in the thriving data centre industry,” it said.
It noted that the construction arm’s earnings outlook remains solid, backed by a strong unbilled order book of RM17.3 billion. Order book replenishment visibility also remains clear, supported by RM17 billion worth of outstanding tenders.
While the property division may face a more cautious earnings outlook, the industry segment remains well supported by continued data centre and infrastructure job flows, it added.