Wednesday, Jul 30, 2003
IJM Corporation Berhad’s (IJM) corporate debt rating has been reaffirmed at A (single A) reflecting its relatively strong financial profile, the diversity of its business, and competitive position domestically and internationally. The difficult domestic construction environment and the risks associated with international ventures continue to be the moderating factors to its credit quality rating.
IJM’s activities range from construction, properties, manufacturing and quarrying to plantations and infrastructure projects. IJM’s construction business continued to drive its revenue base with a contribution of about 70% (FY2001:53%). Going forward, IJM’s order book of about RM1.1 billion is expected to sustain the revenue base for the next one to two years. The sentiment in the domestic construction industry has weakened due to the slow down in government spending placing more pressure on the group’s’ future earnings stream. IJM’s growing participation in construction projects outside Malaysia, especially India helps to cushion its earnings from the difficult domestic economic conditions. The proposed acquisition by Tronoh Mines Malaysia Berhad is viewed positively with the potential to attract more construction jobs to IJM and the synergistic support available for both companies.
IJM had the opportunity to savor the effects of the increase in the average selling price of CPO before the flotation of its plantation unit, IJM Plantations Bhd which has been listed on the Kuala Lumpur Stock Exchange on the 2nd July 2003. The marked improvement in IJM’s performance is reflected in the increase in its revenue to RM28.9 mil as at March 2003 as compared to RM11.4 mil in the previous corresponding quarter. With the partial disposal of the equity in the plantation business, contribution from the division will be limited to the equity-accounted profit in IJMP going forward.
IJM has also made a name in the international markets particularly in India, gaining them a more geographically dispersed portfolio of infrastructure investments in emerging markets. During the year 2002, IJM secured two Build-Operate-Transfer road projects and in 2003 the construction of an elevated viaduct in India. Going forward, IJM is exploring business opportunities in Sri Lanka and West Asia. The geographical diversity exposes IJM to political and local currency risks. Although, IJM was affected by the devaluation of the peso on the group’s investment in Argentina in the preceding year, the situation is expected to improve in the near term with the strengthening of peso. The downside risks of the overseas investments are expected to decline as the respective operations mature and begin to deliver returns.
The group’s financial profile strengthened further aided by an improvement in collection of receivables and lower interest burden through repayment of some borrowings. Debt leverage remains low although additional debt may be incurred to finance future capital investments. Going forward, debt service measures are expected to be strong and maintained at manageable levels.
IJM’s activities range from construction, properties, manufacturing and quarrying to plantations and infrastructure projects. IJM’s construction business continued to drive its revenue base with a contribution of about 70% (FY2001:53%). Going forward, IJM’s order book of about RM1.1 billion is expected to sustain the revenue base for the next one to two years. The sentiment in the domestic construction industry has weakened due to the slow down in government spending placing more pressure on the group’s’ future earnings stream. IJM’s growing participation in construction projects outside Malaysia, especially India helps to cushion its earnings from the difficult domestic economic conditions. The proposed acquisition by Tronoh Mines Malaysia Berhad is viewed positively with the potential to attract more construction jobs to IJM and the synergistic support available for both companies.
IJM had the opportunity to savor the effects of the increase in the average selling price of CPO before the flotation of its plantation unit, IJM Plantations Bhd which has been listed on the Kuala Lumpur Stock Exchange on the 2nd July 2003. The marked improvement in IJM’s performance is reflected in the increase in its revenue to RM28.9 mil as at March 2003 as compared to RM11.4 mil in the previous corresponding quarter. With the partial disposal of the equity in the plantation business, contribution from the division will be limited to the equity-accounted profit in IJMP going forward.
IJM has also made a name in the international markets particularly in India, gaining them a more geographically dispersed portfolio of infrastructure investments in emerging markets. During the year 2002, IJM secured two Build-Operate-Transfer road projects and in 2003 the construction of an elevated viaduct in India. Going forward, IJM is exploring business opportunities in Sri Lanka and West Asia. The geographical diversity exposes IJM to political and local currency risks. Although, IJM was affected by the devaluation of the peso on the group’s investment in Argentina in the preceding year, the situation is expected to improve in the near term with the strengthening of peso. The downside risks of the overseas investments are expected to decline as the respective operations mature and begin to deliver returns.
The group’s financial profile strengthened further aided by an improvement in collection of receivables and lower interest burden through repayment of some borrowings. Debt leverage remains low although additional debt may be incurred to finance future capital investments. Going forward, debt service measures are expected to be strong and maintained at manageable levels.