IJM remains a sell: Research

IJM remains a sell: AmResearch

Published: 2008/10/29

The research firm also revises the construction group's target price to RM2.60

IJM Corp could be hurt by an accident at its building site in India last week, raising uncertainty on the project, AmResearch says. The stock remains a "sell" at AmResearch, which revised the target price to RM2.60.IJM Corp fell five per cent to close at RM3.04 yesterday, after losing 64.7 per cent this year. This compares with a 42.4 per cent fall in the benchmark Kuala Lumpur Composite Index this year.IJM, which has substantial projects in India, last Friday said an accident occurred at one of its building projects in Bangalore. IJM was awarded the civil work contracts worth an equivalent of RM99 million in March 2006.

"Management revealed that the project is insured under the comprehensive 'Constractors All Risks Insurance Policy and Third Party Liability Policy'," AmResearch wrote in a note to client yesterday. "Nevertheless, we believe sentiment on the stock could be further weighed down by lingering uncertainties surrounding the project's status and any subsequent delay in work flows," AmResearch said. It maintained the construction firm's profit assumptions pending further updates from IJM.

An unexciting earnings outlook, weakening order flows and rising concerns over the tight balance sheet are likely to keep IJM's shares valuation compressed at fiscal 2010 and 2011 forward price-earnings ratio of between eight and nine times, AmResearch said.Its earnings forecast for IJM in the next two years are 18 to 29 per cent lower than consensus estimates.IJM's foreign shareholding level also remains relatively high at more than 20 per cent, the research said.Malaysian shares with high foreign shareholding are more vulnerable in the current bearish market as overseas investors tend to sell emerging market assets to bring money home or switch to safer investments.