IJM set to ride on pump-priming measures

Wednesday November 5, 2008

IJM set to ride on pump-priming measures

SUBANG: IJM Corp Bhd sees potential of replenishing its present order book of RM4.6bil as governments around the world pump prime their economies.

“Apart from putting money directly into the people’s pockets via tax reduction and rebates, governments will stimulate construction activities. If that happens, there will be more construction projects,” managing director Datuk Krishnan Tan said after the company EGM yesterday.

IJM will continue to scout for opportunities in its existing markets including India, Malaysia, United Arab Emirates and Bahrain. “We’re talking about 66,000km of roads to be created in India and only 13,000km of that had been completed. The key is the availability of funding.
Private participation will be difficult because of scarcity of cash, so it must be via government spending,” Tan said.

The Middle Eastern countries were likely to maintain their level of investments as “they’re still making a lot of money with oil price at US$70 per barrel,” he added.

“We have a fairly sizeable order book of about RM4.6bil and a chewing rate of RM200mil per month. Our businesses are still very strong even if there is margin comprehension issue relating to construction.”

While domestic fuel prices have been re-adjusted and steel prices come off from almost RM4,000 per tonne to RM2,850, prices of other materials like cement have seen little change.
Prices of oil, bitumen and cement in India were unchanged, hence keeping pressure on margins, he said.

Meanwhile, Industrial Concrete Products Bhd (ICP), a subsidiary of IJM which provides pretensioned-spun concrete piles and ready-mixed concrete for Malaysia, India and China, is enjoying relatively strong pricing. Tan said demand for concrete piles and ready-mixed concrete was still positive, driven by regional port expansions and major infrastructure works. However, if material prices were to dip, ICP’s pricing would have to decline too. “We don’t think there will be major impact in margins as it’ll be driven by reduction in input cost,” he added.

Given the credit tightening in various markets that the group operates in, IJM may see a delay in payments for its construction jobs. “So far, we have not seen the situation (of delayed payments) but, considering that liquidity may be an issue in some of our markets going forward, I won’t be surprised if we see a level of difficulty in some of our clients,” Tan said.
Contractors were usually the first to be hit by credit tightening, he said, given that the construction sector tended to be a high risk one.

“We are very careful with whom we deal and, therefore, we do not see defaults as far as payments are concerned but we can expect some delays,” he said, adding that progress of existing construction projects, however, would be on schedule. Building material transactions in India, meanwhile, were mostly in cash, hence limiting payment risks, Tan said. Meanwhile, the group’s property segment may delay launches for medium-cost housing in the cities due to pressure on disposable income.

Yesterday, IJM secured shareholders’ approval to proceed with the privatisation of ICP. It is offering to buy the remaining ICP shares it does not own via a combination of cash and issuance of new IJM shares. As at Monday, it had already increased its ICP stake to 83.9%. Today is the deadline for ICP shareholders to accept IJM’s offer.

IJM says it can weather the storm

IJM says it can weather the storm
By Zaidi Isham Ismail
Published: 2008/08/27
BTimes

MALAYSIA’S second-largest builder IJM Corp Bhd expects to perform well in fiscal 2009 as a slowdown in its construction division will be offset by its other businesses.IJM group managing director Datuk Krishnan Tan Boon Seng said although the company is affected by rising raw material cost, high oil prices and worldwide inflationary pressures, it will be able to weather the storm for the rest of the year.“The company has five business divisions which are construction, property, plantations, industries and infrastructure and others and each sector poses its own set of challenges.“The construction sector is not doing well right now but at the same time the other four are doing well.

“So, overall IJM should be doing allright this year,” Tan told reporters in Selangor yesterday after the company’s annual general meeting.IJM returned to profitability with a RM91.3 million net profit in the first quarter to June 30 2008 compared with a net loss of RM746.8 million in the same quarter a year ago.

On the listing of its Indian unit, Tan said the plan has been deferred due to the high interest rate of 13 per cent which will affect property demand in the sub-continent.“It is not the right time to list but ultimately we will have to do it,” said Tan.The builder plans to raise as much as RM200 million by selling shares in IJM (India) Infrastructure Ltd, the largest foreign-owned company in the infrastructure and construction sector in India.

On the RM3.2 billion West Coast highway project, Tan said work has not started and cost has risen to double-digit figures.IJM Corp holds a 25 per cent stake in the highway via Kumpulan Europlus Bhd.Tan said IJM wants to grow its other businesses such as its water treatment plant in Vietnam, a power plant in India and is also looking at other seaports.He said international markets especially the Middle East will be the main growth area as it is flushed with oil money.It now has two construction jobs in Bahrain and one each in Dubai and Abu Dhabi in the United Arab Emirates.