IJM warns of slower year for property arm

SUBANG JAYA: IJM Corp Bhd, whose net profit more than doubled in the first quarter ended March 31, 2015 (1Q), is expecting a slow year for its property division.
CEO and managing director Datuk Soam Heng Choon said the local property market is facing consumer confidence issues due to the difficulty in getting home loans.
“There is a mismatch of margin of financing. In 1Q our property sales were RM300 million. Our sales this year will definitely be affected as the market is weaker now. Last year we achieved sales of RM1.8 billion. This year it will be lower,” he told reporters after its AGM and EGM yesterday.
Despite the weak sentiment, Soam said it has lined up RM1.2 billion worth of property launches for the next six months. The launches will depend on response during the registration period. The group has RM1.7 billion unbilled sales currently.
On its project in London, Soam said the weakening ringgit has not affected investors’ interest.
“Our London project is also marketed to other countries with 40% of investors being locals, 30% from Malaysia and 20% from Singapore and Hong Kong. We did not see any Malaysian investors pulling back,” he added.
Soam said the group has some borrowings in US dollars for the expansion of its plantation division in Indonesia.
“But group wide, we have some borrowings in other currencies where we are getting a forex gain.
“Even though we have US denominated borrowings, these are only translational losses, if any. At the same time we also have translational gain,” he added.
On its construction division, Soam said it has an order book of RM7 billion, which comprises mostly new projects that have just begun. The group will start recognising contribution from some of these projects in the second half of the year.
He also said IJM is bidding for RM15 billion worth of projects.
In 1Q, the group’s net profit more than doubled to RM336.87 million from RM133.39 million a year ago, due mainly to a one-off gain from the disposal of 74% equity interest in Jaipur Mahua Tollway Pte Ltd amounting to RM168.7 million.
The group is also in the midst of disposing of a 70% stake in Swarna Tollway for RM400 million.
Soam said it will subsequently dispose of both tollways after getting approval from the Indian authorities. The total gain expected from 100% disposal of both tollways amounts to RM1 billion.
Revenue for the quarter fell 13.9% to RM1.18 billion from RM1.37 billion a year ago mainly due to lower revenue contribution from the construction, property and plantation divisions.
On the exclusion of IJM Corp by the Norwegian sovereign wealth fund manager, Soam said there is no impact as the fund exited IJM Plantations in 2011.
The exclusion started in 2010, covering tobacco and weapons companies, while most plantation companies were excluded in 2011 and 2012, he explained. “Because of our parentage over IJM Plantations, they decided to exclude IJM Corp.”
Soam said: “We don’t agree with what they said about our practice. We have embarked on a roadmap to do the necessary certification for all our mills in our plantations, both in Malaysia and Indonesia.”
IJM started work on the roadmap more than five years ago and hopes to attain Roundtable on Sustainable Palm oil certification in three to four years’ time.