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KUALA LUMPUR (March 16): IJM Corp Bhd's (KL:IJM) plans to list parts of its assets, including construction and toll road business, could provide shareholders with an alternative pathway to unlock value, analysts said, at a time when the group is weighing a takeover offer from rival Sunway Bhd (KL:SUNWAY).
IJM has committed to float its construction division — potentially including its industrial building materials arm Industrial Concrete Products Sdn Bhd — as well as its toll road assets within the next two years, as part of a broader effort by the construction and infrastructure conglomerate to crystallise the underlying value of its assets.
“We advise investors to hold out for a better offer; at the very least, IJM’s latest proposals provide another viable pathway to crystallise the deep embedded value of its assets,” CIMB Securities, the most bullish analyst on the conglomerate, said in a note on Monday.
The potential floatation of the assets could act as a catalyst for IJM to strengthen its balance sheet and potentially distribute special dividends to shareholders, the research house added.
The construction listing is expected to involve IJM’s Malaysian and Singapore operations, which together have an order book of about RM9.6 billion. Meanwhile, the toll road listing could begin with the several mature, cash-generating domestic highways, including the New Pantai Expressway, Besraya Expressway, and Kajang–Seremban Highway.
The floatation plan also comes right after independent adviser M&A Securities Sdn Bhd had, on Friday (March 13), advised shareholders to reject Sunway’s at RM3.15 per share offer, saying the bid significantly undervalues the group.
The offer price represents a 46% to 51% discount to the adviser’s valuation of RM5.84 to RM6.48 per share. It is also 34% to 44% lower than the RM4.80 to RM5.63 valuation range estimated by Rothschild & Co, which is acting as IJM’s financial adviser for the exercise.
IJM also plans to exit its India operations, which would allow the group to refocus on markets offering stronger returns while reducing earnings volatility linked to foreign exchange movements.
Since the beginning of the year, IJM shares have risen about 6%, although the stock has fallen more than 12% since Sunway’s offer was announced two months ago.
Of the 14 analysts covering IJM, 10 maintain “buy” recommendations, led by CIMB Securities with a target price of RM3.50, while the remaining four have “hold” calls. The consensus 12-month target price stands at RM3.28, implying a potential upside of about 36% from the stock’s last traded price of RM2.41 at the time of writing on Monday.
“While we maintain our reject recommendation due to the offer fundamentally undervaluing IJM’s growth trajectory, the recent share price weakness presents an attractive risk-reward entry point for new investors to capture upside upon the deal’s potential completion,” Kenanga Research said in a separate note.
Kenanga added that although it views the offer price as unfavourable, a merged entity could enhance operational efficiency, potentially improving IJM’s construction margins while creating synergies across property and industrial manufacturing segments.
However, CGS International said investors who believe the deal will proceed may still consider accepting the offer.
“We still recommend investors accept Sunway’s offer but stay sceptical on it materialising, which is reflected in the implied takeover price for IJM of around RM2.90 based on current share prices,” the brokerage said. “If the deal fails to reach the required 50% plus one share acceptance threshold, any negative share price reaction could present a buying opportunity.”
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