Data centres to lead IJM growth surge in FY26

The Star

3 days ago

PETALING JAYA: With several data centre projects in the pipeline, next year could be a turning point for IJM Corp Bhd as it steps up its presence in the high-demand sector, says CIMB Research.
The research house raised its new-job win forecasts for IJM for its financial year ending March 31, 2026 (FY26) and FY27 by 22% to 33% or about RM6bil per year as the group focuses on delivering one or two major data centre bids worth RM1bil to RM2bil each.
The research house noted that as of March 31 this year, IJM's order book stood at a healthy RM6.6bil, or 2.6 times its FY25 construction revenue.
'Owing to an increasingly visible tender pipeline, we have raised IJM's FY26 to FY27 new order book assumptions to RM6bil a year, but these projections are still at the lower end of IJM's RM6bil to RM8bil new contract win target for FY26, suggesting further upside to our earnings forecast.
'We expect FY26 to be a breakout year for IJM, underpinned by five active data centre bids for global technology companies, with three already at an advanced stage,' the research house said in a report following a recent presentation by IJM.
Beyond data centre tenders, IJM is actively bidding for government-related projects such as the Penang Light Rail Transit project, and hospital and road projects in Sarawak. It also witnessed an uptick in private tenders for industrial facilities.
For FY26, IJM expects its 60%-owned subsidiary Kuantan Port to handle 23 million to 25 million tonnes of cargo, supported by the shipping of commodities such as bauxite, palm oil, liquid chemicals and iron ore.
Going forward, CIMB Research foresees three game-changing catalysts reshaping Kuantan Port's long-term potential.
One is the commencement of operational services on the East Coast Rail Link in January 2027.
The second is Petroliam Nasional Bhd's proposed Southern Carbon Capture and Storage Hub in Kuantan, while the third will come from the second phase of Alliance Steel (M) Sdn Bhd's expansion plans.
'Of these three catalysts, we believe that Alliance Steel's expansion plans will directly lift Kuantan Port's growth trajectory, if the planned product lineup is approved.
'This could potentially double Alliance Steel's throughput volumes to between 14 million and 18 million tonnes from between seven million and nine million tonnes or 36% to 46% of Kuantan Port's existing capacity, providing greater impetus for the port to kick off its own expansion plans' said CIMB Research.
Outside Malaysia, the group is a leading contender for a public housing project in Nusantara, Indonesia, worth over RM1bil.
Over in Britain, IJM has been scouting for new opportunities from integrated road infrastructure, industrial and logistics facilities, and property redevelopment projects on long-term leases.
This aligns with the group's broader target of having a 30% contribution from recurring income, said the research house.
It noted that throughout FY24 and FY25, IJM has quietly established its name in Britain through a series of transformative collaborations.
Through Innova, a joint-venture with Britain's Network Rail, IJM is finalising six over-station development sites with redevelopment potential once planning consent is secured within a 12 to 18 month timeframe.
To boost the group's supply chain capabilities in Britain, IJM completed the acquisition of a 50% stake in British contractor JRL Group, which has been appointed as main contractor for 88 Royal Mint Garden, which is the second phase of Royal Mint Gardens development.
In addition, IJM is also involved in The Wheat Quarter, which is a mixed-use regeneration project involving the old Shredded Wheat Factory site in Welwyn Garden City in Hertfordshire.
'Backed by a strong balance sheet, we maintain our 'buy' rating on IJM with a target price of RM3.70 up from RM3.40. At FY27 and FY28 price-earnings multiples of 16 times and 15 times, respectively, the stock is trading at or slightly below its historical mean,' the research house said.