IJM’s data centre job a ‘critical’ win

KUALA LUMPUR: IJM Corp Bhd’s maiden contract win in the date centre space is seen as a milestone for the firm as it makes its foray into a fast-growing market, say analysts.

“In our view, while the data centre contract value is on the smaller side, it is a critical step for IJM to penetrate a booming data centre construction market where a mammoth 2.8GW is still in the pre-construction phase,” said Hong Leong Investment Bank (HLIB) Research in a note.

The contract, secured from Telekom Malaysia, is worth RM331.7mil, for the construction of a data centre in Iskandar Puteri in Johor.

The research firm believes that the contract win could open doors for IJM to higher-value opportunities in what appears to be a multi-year cycle for data centres.

HLIB cited IJM’s current client, Telekom Malaysia, which has recently entered into a joint venture to develop a data centres with an initial capacity of 64MW and an ultimate capacity of 200MW.

RHB Research is of the view that IJM may extend its thrust into the industrial building segment given the number of planned supplies of industrial properties surged to 1,372 units in 2023 versus less than 900 units in the previous five years.

“Semiconductor facilities and warehouses may underpin the growth in industrial properties, backed by robust trends in investments with

Malaysia recording a 13% year-on-year jump to reach RM83.7bil in 1QCY24,” said RHB in its company update.

Kenanga Research, meanwhile, noted that IJM’s latest contract win, its third in FY25, brings the group’s year-to-date contract wins to RM1.29bil against its full-year assumption of RM5bil. The contract also boosts its outstanding construction order book to RM7.3bil.

There will be more wins in store for IJM, said the research firm, as it projects a “significant revitalisation” of the construction section in 2024.

It predicts the upcycle will be backed by the roll-out of the RM45bil Mass Rapid Transit 3 (MRT3) project and several flood mitigation projects reported to be worth RM13bil, as well as the vibrant private sector construction market underpinned by massive investment in new semiconductor foundries and data centres.

It also noted that IJM is also eyeing work packages from various projects in East Malaysia and Indonesia.

“We like IJM as it is poised to garner a slice of action in the imminent mega rail projects, such as the MRT3 and Bayan Lepas Light Rail Transit (LRT) given its involvement in the previous MRT and LRT projects, its strong earnings visibility underpinned by an outstanding construction orderbook of RM7.3bil and new property sales of RM1.4bil.

It added also that IJM’s 60%-owned Kuantan Port is the largest port in the East Coast, capturing export and import activities growth.

Kenanga has a “market perform” call on IJM with an unchanged target price of RM3.

HLIB is more bullish with a “buy” call and target price of RM3.50 while RHB is also a “buy” with a target price of RM3.60.