IJM poised for re-rating as Shah Alam logistics projects gain momentum

New Straits Times

7 days ago

KUALA LUMPUR: Strong execution across key industrial projects in Shah Alam is putting IJM Corp Bhd in prime position to capitalise on Malaysia's logistics expansion, according to RHB Research, which sees catalysts in place for a sustained valuation re-rating.
The research house reaffirmed its BUY call on IJM and raised its target price to RM3.73 from RM3.30, translating to a 23 per cent potential upside and an estimated 3 per cent dividend yield. The revised valuation reflects faster-than-expected progress on major contracts and optimism over Shah Alam's growing role as a regional logistics hub.
The upgraded TP is underpinned by IJM's steady progress on two high-value warehouse developments. The first job in Shah Alam, awarded in June 2023, is worth RM654 million and is for the design, execution, and construction of phase one of the Shah Alam International Logistics Hub, commissioned by Global Vision Logistics. Phase one covers the design and construction of a 4-storey warehouse, multi-level parking, a single-storey office, and ancillary buildings. The second warehouse-related job in Shah Alam is worth RM584 million, awarded in June 2024 by Strategic Sonata for the construction of Plot A of a logistics hub in Section 15. The adjoining Plot B is being developed by GDB Holdings for RM866 million.
RHB said that site visits in July showed rapid acceleration, particularly on Plot A, which has transformed into a "Valley of Cranes" since March. Both projects are estimated to be 60–80 per cent complete, with full delivery slated for the first half of 2026.
The research firm highlighted that Maersk's 2.1 million sq ft storage and office facility in Section 26 is a strong vote of confidence in Shah Alam's logistics potential. Strategically positioned just 30 to 40 minutes from Port Klang, the area offers direct access to import/export routes without the bottlenecks of port congestion – a competitive edge that has kept warehouse demand robust.
RHB emphasised that a major data centre contract win could serve as the next re-rating catalyst, potentially driving the share price beyond current levels. Despite strong project visibility, IJM still trades at a discount to sector peers, suggesting room for valuation catch-up.
Industrial building contracts, excluding data centres, account for 26–28 per cent of IJM's RM6.6 billion outstanding order book.
Although earnings forecasts remain unchanged, RHB raised its target per earnings ratio for the construction arm to 18.5x from 15x. The upward revision factors in easing global trade concerns, fresh trade pacts, and Malaysia's reduced tariff rate of 19 per cent with the US. The research house also rolled forward its valuation base year to fiscal year 2027, incorporating a 2 per cent ESG premium.
Risks include delays in contract awards or project execution, which could slow earnings momentum, RHB said.
The bottom line is, with major projects advancing ahead of schedule and Shah Alam cementing its role as a logistics hub, IJM is positioned to ride the next wave of industrial development, with valuation catalysts still in sight.