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RAM Ratings affirms IJM Corp’s AA3/Stable sukuk rating
Published on 02 Oct 2024.
RAM Ratings has affirmed the AA3/Stable rating of IJM Corporation Berhad’s (IJM Corp or the Group) RM3.0 bil Sukuk Murabahah Programme. We have also affirmed the AA3(s)/Stable/P1(s) ratings of its RM5.0 bil Islamic Medium-Term Notes Programme and Islamic Commercial Papers Programme issued under funding vehicle IJM Treasury Management Sdn Bhd. The issue ratings reflect the credit profile of IJM Corp as the provider of an irrevocable and unconditional guarantee based on the shariah principle of Kafalah.
The affirmations are based on the expectation that IJM Corp’s credit metrics will remain commensurate with its ratings, anchored on healthy earnings visibility from its outstanding construction order book and unbilled sales. The Group’s diversified businesses and sturdy track record in the local construction and property sectors are key rating strengths, complemented by a sound balance sheet and strong liquidity and financial flexibility. Moderating the ratings are IJM Corp’s contingent exposure to a 41% stake in the delayed West Coast Expressway and its vulnerability to foreign exchange and interest rate movements, given the Group’s foreign currency-denominated floating rate debts.
New construction jobs secured in FY Mar 2024 amounted to a higher RM3.7 bil, with new contracts worth RM1.9 bil in 5M FY Mar 2025 maintaining this momentum. Comprising a mix of infrastructure jobs and industrial facilities, the new contracts brought IJM Corp’s outstanding construction order book to a robust RM6.6 bil as at 31 August 2024 (RM4.75 bil as at 31 August 2023). The Group elicited RM2.4 bil of property and land sales in FY Mar 2024 (FY Mar 2023: RM2.7 bil) while unbilled sales stayed fairly healthy at RM2.3 bil as at end-June 2024 (end-March 2023: RM3.0 bil).
IJM Corp’s core pre-tax profit (excluding unusual items) was 19% higher in fiscal 2024, lifted by the stronger profit showing of its industry, port and toll divisions which offset weaker construction and property earnings. Its overall performance exceeded our projections. Core earnings continued to improve, rising 20% in 1Q FY Mar 2025, driven by the sturdier profit showing of its construction, property and port operations. Future profit is expected to be sustained, backed by earnings visibility from a robust outstanding construction order book and unbilled property sales, as well as continued contributions from the industry and infrastructure segments.
IJM Corp’s debt level inched up slightly to RM6.24 bil as at end-March 2024 (as at end-March 2023: RM6.06 bil). Gearing stayed stable at 0.57 times on the back of a larger capital base, although adjusted funds from operations debt coverage (FFODC) weakened slightly to 0.17 times in FY Mar 2024 (FY Mar 2023: 0.19 times). These ratios exclude non-recourse infrastructure debt and earnings which are concession-related, ring-fenced and have no recourse to the holding company. The Group projects debts to increase to RM7 bil-RM7.70 bil in the next couple of years, some of which are non-recourse infrastructure debts. Adjusted FFODC is nevertheless anticipated to hover at 0.15 times-0.20 times – levels that are supportive of the current ratings.
Analytical contacts
Karin Koh, CFA
(603) 3385 2508
Karin@ram.com.my
Thong Mun Wai
(603) 3385 2522
munwai@ram.com.my
Media contact
Sakinah Arifin
(603) 3385 2500
sakinah@ram.com.my
The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.
RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.
Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.
Published by RAM Rating Services Berhad
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