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Thursday, April 1, 2010

KLCI Stock - IJM / 3336 - 2010 Quarter 3

OSK Target Price: 4.7 (22 March 2010)
My Target Price: 4.97+0.05=5.02 (PE 20, EPS 0.2484, DPS 0.05)
My decison: NOT BUY (unless price <=4.3)
Reason: Overvalue, low ROE, revenue dropped

My study based on 2010 Quarter 3 report (number in '000):-
- The Group recorded a decrease of 10.3% operating revenue over the corresponding quarter of the preceding year, mainly due to lower revenues from the Group’s Construction division mainly as the Group’s major projects have reached the tail-end of its project lifecycle while construction works at major projects such as the Grand Hyatt in Kuala Lumpur and new India projects have only just commenced contributions. In addition, lower selling prices of building materials coupled with lower market demand for the quarrying and ready-mix segments also resulted in the Group’s Industry division reporting a 16% decline in revenue
- The Group’s operating profit before tax for the current quarter rose as all of the Group’s main operating divisions reported higher profits. The most significant improvement was recorded by the Group’s Property division buoyed by improved property sales which doubled its profit
- The lower Plantation revenue was mainly due to the drop in prices of crude palm oil (CPO) from an average of RM2,874 per ton in the previous year’s corresponding period to RM2,205 per ton in the current year-to-date
- Compared to preceding quarter, the Group’s pre-tax profit rose, mainly due to improved plantation profits following increased production of fresh fruit bunches (FFB)
- Initial amortisation and higher finance costs of new toll concessions in India are expected to have a negative impact on the division results
- Estimate next 4Q eps after 2010 Q3 result announced = 0.0621*4 = 0.2484 (expecting revenue and profit recover hence no decrease on eps), estimate PE on current price 4.88 = 19.44(DPS 0.05)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.2556, estimate highest/lowest PE = 19.13/16.55 (DPS 0.05)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.271, estimate highest/lowest PE = 25.13/15.68 (DPS 0.05)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.3251, estimate highest/lowest PE = 19.53/16.15 (DPS 0.05)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.2612, estimate highest/lowest PE = 21.06/12.44 (DPS 0.25)

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