IJM Corp Retains BUY Calls as Data Centre Projects Drive 32% Profit Surge

IJM Corp Bhd has retained BUY calls from three major research houses RHB Research, Hong Leong Investment Bank (HLIB), and CIMB Securities, following a strong set of first-quarter results for FY2027 that beat market expectations. The construction-to-property group reported a 32% year-on-year increase in core profit to approximately RM116 million, driven largely by a remarkable 112% surge in construction pre-tax profit as work progressed on data centre and industrial projects.

The positive earnings momentum prompted analysts to raise their target prices significantly. RHB Research lifted its target from RM3.05 to RM3.50, implying a 22% upside from the current trading level. HLIB raised its target from RM3.02 to RM3.40, while CIMB Securities increased its target from RM2.95 to RM3.25. CIMB also revised its FY27 dividend forecast upward, implying a 6.3% yield, adding to the stock's appeal among income-seeking investors.

The construction division's pre-tax margin expanded to 5.5% during the quarter, up from 3.6% a year earlier, reflecting improved project execution and operational efficiency. RHB noted that the margin expansion was a key driver of the earnings beat, as the group benefited from higher-value industrial and technology-related projects. HLIB added that earnings were also supported by the Industry division, where pre-tax profit rose 13.7% on the back of stronger demand for spun piles and ready-mixed concrete materials essential for large-scale infrastructure and building works.

CIMB Securities highlighted that the Industry division's order book has reached approximately 1.2 million to 1.3 million tonnes, providing good revenue visibility for the coming quarters. The group's construction order book has also been replenished with new wins, having secured RM1.8 billion in new jobs so far in FY27. Among the notable contracts are two semiconductor and medical technology projects valued at RM909.5 million, reflecting the group's successful pivot toward higher-margin industrial facilities. The company's tender book now stands at a substantial RM18 billion, with around 40% comprising industrial facilities and data centres segments that are expected to remain growth drivers given the ongoing digitalisation and AI infrastructure build-out in the region.

In addition to its robust operational performance, IJM declared a special dividend of 10 sen per share, following the disposal of its 142 million treasury shares. The payout forms part of the group's broader RM3 billion value-unlocking initiative, which aims to enhance shareholder returns through asset monetisation and capital management. The special dividend, combined with the regular dividend, is expected to boost overall yield and reinforce investor confidence in the group's commitment to distributing value.

The positive analyst sentiment was reflected in the stock's performance on Thursday morning. As of 11.08 am, IJM's share price had gained 0.70% to RM2.88, bringing its market capitalisation to approximately RM10.5 billion. While the stock still trades below the revised target prices, the narrowing gap suggests that the market is gradually recognising the group's earnings potential and strategic repositioning.

Looking ahead, analysts expect IJM to continue benefiting from the secular tailwinds in data centre construction and industrial infrastructure, both in Malaysia and in its overseas markets. The group's expertise in large-scale project delivery, coupled with its integrated business model spanning construction, property development, and manufacturing, positions it well to capitalise on the region's infrastructure spending boom. However, risks remain, including potential cost overruns, supply chain disruptions, and macroeconomic headwinds that could affect project timelines and margins.

Nonetheless, the first-quarter results have provided a strong start to FY27, and the management's guidance on the tender book and order book suggests that earnings momentum is sustainable. With all three research houses maintaining BUY calls and raising their target prices, IJM appears set to remain a favoured pick among construction and infrastructure plays on Bursa Malaysia.