IJM's RM1.23bil Kulim deal signals breakthrough in semiconductor manufacturing

KUALA LUMPUR: IJM Corp Bhd's RM1.23 billion contract to build a semiconductor manufacturing facility in Kulim marks a breakthrough in its advanced manufacturing business, analysts said.

They expect the fast-track project to support the company's earnings over the next two financial years.

Hong Leong Investment Bank Bhd analyst Brian Chin said the award marked IJM's first billion-ringgit semiconductor plant package as a main contractor, strengthening its position in the nation's semiconductor supply chain.

He said IJM's in-house industrialised building system (IBS) capabilities likely played a key role in securing the contract, given the project's tight 14-month construction timeline.

The contract was awarded to IJM Construction, a wholly-owned subsidiary of IJM, by Austria Technologie & Systemtechnik (Malaysia) Sdn Bhd (AT&S Malaysia).

The project at Kulim Hi-Tech Park, Kedah, involves the design and construction of a four-storey production building, a three-storey central utility building, a wastewater treatment facility and associated infrastructure.

Construction is scheduled to begin in the fourth quarter of 2026 and be completed within 14 months.

Chin estimated the project would generate a high-single-digit profit-before-tax margin, with the accelerated construction schedule expected to bring forward earnings recognition in the financial years ending March 2027 and 2028.

HLIB maintained its "Buy" call on IJM with an unchanged target price of RM3.40, while keeping the earnings forecast as

Public Investment Bank Bhd analyst Denny Oh said the award would increase IJM's estimated outstanding order book by 8.5 per cent to RM15.7 billion, including its share of associates.

He estimated the project could contribute about seven per cent to IJM's net profit over the financial year 2027 and 2028 (FY27-28) period, assuming high single-digit margins.

However, Oh left earnings forecasts unchanged, as the contract was already within the firm's RM8 billion order-book replenishment assumption for FY27.

Public Investment Bank reiterated its "Outperform" call on IJM with an unchanged target price of RM3.40.

RHB Research analyst Adam Mohamed Rahim also maintained a "Buy" call and RM3.50 target price, estimating a profit-before-tax margin of between five and eight per cent for the project.

He said the award reinforced IJM's exposure to industrial construction in the northern region, where the group had secured other projects involving semiconductor facilities, automated storage and retrieval systems and medical device manufacturing.

These included an RM455 million automated storage and retrieval system warehouse for a multinational technology company's semiconductor facility in Kulim and an RM454.5 million medical device manufacturing facility for Intuitive Surgical Malaysia in Batu Kawan, Penang.

Adam estimated that industrial-related projects, including data centres, accounted for 60 to 70 per cent of IJM's Malaysian outstanding order book.

He added that potential infrastructure awards, including the Penang Light Rail Transit project, could provide further catalysts for a valuation rerating.

RHB Research kept its earnings forecasts, as the latest award was within its FY27 job replenishment target of RM7 billion.

Despite the positive outlook, the analysts' unchanged earnings forecasts indicate that the contract is broadly in line with expectations rather than an immediate catalyst for earnings upgrades.

The project nevertheless strengthens IJM's track record in complex industrial facilities as demand for semiconductor manufacturing capacity and advanced technology infrastructure expands in Malaysia.