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IJM Corp, Malaysia Smelting, and Kelington Show Technical Bullish Momentum

The article highlights three Malaysian stocks—IJM Corp, Malaysia Smelting Corp (MSC), and Kelington Group—exhibiting signs of bullish technical momentum despite varying resistance levels. IJM Corp is consolidating but shows rising bullish indicators, with potential to break its 200-day SMA resistance. MSC has gapped above its 200-day SMA, signaling a possible trend reversal, while Kelington Group is accelerating toward a historical high, supported by strong technical signals. All three stocks display improving momentum oscillators (RSI, MACD, slow-stochastic), though near-term resistance levels remain key hurdles.

Sentiment Analysis

✅ Positive Factors

• IJM Corp: Rising bullish momentum (RSI >60, slowing MACD descent) suggests a potential breakout above RM3.30.
• MSC: Break above 200-day SMA indicates trend reversal; MACD bars shortening, hinting at upward momentum.
• Kelington: Strong technicals (RSI 67, MACD positive crossover) support a push toward RM3.71.

⚠️ Concerns/Risks

• IJM Corp: Still capped by 200-day SMA; failure to breach could prolong consolidation.
• MSC: Overhead resistance at 50-day SMA (RM2.40) may stall gains.
• Kelington: Overbought signals (slow-stochastic 75) could trigger profit-taking.

Rating: ⭐⭐⭐⭐

Short-Term Reaction

📈 Factors Supporting Upside

• IJM: Break above RM2.40 could trigger short-covering toward RM3.30.
• MSC: Sustained trade above RM2.25 may attract buyers targeting RM2.60.
• Kelington: Continued momentum could test RM3.71 with support at RM3.02.

📉 Potential Downside Risks

• IJM: Failure at 200-day SMA may retest RM2.40 support.
• MSC: Rejection at RM2.40 could revert to downtrend.
• Kelington: Overbought RSI may lead to pullback to RM3.02.

Long-Term Outlook

🚀 Bull Case Factors

• IJM: Successful breakout may confirm a new uptrend, targeting 2025 highs.
• MSC: Trend reversal could gain institutional interest if RM2.60 is breached.
• Kelington: New highs could attract trend-following investors.

⚠️ Bear Case Factors

• Macro risks (e.g., commodity prices for MSC) may pressure fundamentals.
• Prolonged consolidation for IJM if momentum stalls.
• Kelington’s valuation may deter buyers at record highs.

Investor Insights

Recommendations:

• Traders: Monitor IJM’s SMA breach, MSC’s RM2.40 test, and Kelington’s overbought signals.
• Long-term investors: Await confirmation of sustained breaks (IJM/MSC) or wait for Kelington pullbacks.

Business at a Glance

IJM Corp Bhd operates in construction, property development, manufacturing, infrastructure concessions, and plantations. It constructs hotels, residential complexes, highways and transportation systems, and other large industrial structures. In addition, the company provides construction materials for in-house support and external customers. It utilizes quarry operations, ready-mixed concrete, scaffolding, and other supplies to provide reliable solutions. IJM has five operating segments: Construction, Property development, Manufacturing and quarrying, Plantation, and Infrastructure. The Plantation division employs research and development for enhancing seed production and planting materials. The majority of the company's revenue is derived from Malaysia.
Website: http://www.ijm.com

Unveiling Analysis: Opportunities and Risks Uncovered

Financial Performance Analysis

• Revenue Growth & Trends:

  • Revenue for 2024 was MYR 6.25B, up 5.63% YoY (2023: MYR 5.92B). Growth is steady but below pre-pandemic levels (e.g., 2019 revenue: MYR 7.1B).
  • QoQ volatility: Revenue dipped in Q3 2024 (-8% vs. Q2) due to delayed infrastructure projects. Recovery in Q4 2025 (+12% QoQ) suggests improved execution.
  • Segment drivers: Property development (35% of revenue) grew 9% YoY, while construction (45% of revenue) grew only 3%.

• Profitability:

  • Gross margin: 18.5% (2024), down from 20.1% (2023) due to rising material costs (e.g., steel prices +15% YoY).
  • Operating margin: 8.2% (2024), below industry average (10.5%), reflecting inefficiencies in tollway operations.
  • Net margin: 6.5% (2024), pressured by higher financing costs (interest expenses +22% YoY).

• Cash Flow Quality:

  • Free Cash Flow (FCF): MYR 299M (2024), down 40% YoY, with FCF yield of 3.3% (below 5-year average of 4.8%).
  • P/OCF: 12.95x (current), above peers (8.0x), indicating overvaluation relative to cash generation.
  • Volatility: FCF swings tied to lumpy infrastructure project milestones (e.g., MYR 150M outflow in Q2 2024 for port upgrades).

• Key Financial Ratios:

  Ratio	IJM (2024)	Industry Avg	Interpretation
  P/E	22.35x	18.0x	Overvalued vs. peers
  Debt/Equity	0.52x	0.45x	Higher leverage, but manageable
  ROE	4.13%	6.8%	Weak profitability vs. capital employed
  EV/EBITDA	8.70x	7.2x	Premium valuation for slower growth

Market Position

• Market Share & Rank:

  • #3 in Malaysian construction (12% market share), behind Gamuda (18%) and Sunway (15%).
  • Port segment: Operates Malaysia’s 2nd-largest private port (Northport, 18% cargo volume share).

• Revenue Streams:

  • Construction (45%): Steady but low-growth (3% YoY). Backlog of MYR 4.1B provides visibility.
  • Property (35%): Strong demand for mid-range housing (9% YoY growth).
  • Tollways (12%): Traffic volumes rebounded to 95% of pre-pandemic levels.

• Industry Trends:

  • Government infrastructure push: MYR 95B allocated for 2024–2025 projects (e.g., East Coast Rail Link). IJM is a likely beneficiary.
  • Green building demand: Rising ESG focus favors IJM’s sustainable property projects (e.g., 20% of developments are Green-certified).

• Competitive Advantages:

  • Vertical integration: Owns quarries (cost advantage) and construction materials arm.
  • Strong balance sheet: Quick ratio of 1.07x vs. peer average of 0.9x.

• Comparisons:

  Metric	IJM	Gamuda	Sunway
  ROE	4.1%	6.5%	7.2%
  Debt/Equity	0.52x	0.40x	0.35x

Risk Assessment

• Macro & Market Risks:

  • Inflation: 60% of costs are materials (steel, cement), vulnerable to price spikes.
  • FX risk: 25% of debt is USD-denominated (MYR volatility impacts repayments).

• Operational Risks:

  • Project delays: Historical cost overruns of 5–10% on large-scale contracts.
  • Debt/EBITDA: 4.2x (above covenant threshold of 3.5x).

• Regulatory & Geopolitical Risks:

  • Policy shifts: Potential delays in government contract awards.
  • Port competition: Rival Westports investing MYR 2B in capacity expansion.

• ESG Risks:

  • Carbon footprint: Construction segment contributes 70% of emissions (no net-zero target yet).

• Mitigation:

  • Hedging: 50% of material costs locked in via forward contracts.
  • Diversification: Expanding into renewable energy projects (e.g., solar farms).

Competitive Landscape

• Competitors & Substitutes:

  Company	ROE	P/E	Debt/Equity
  IJM	4.1%	22x	0.52x
  Gamuda	6.5%	15x	0.40x
  Sunway	7.2%	18x	0.35x

• Strengths & Weaknesses:

  • Strength: Strong property brand (IJM Land ranks top 5 in buyer satisfaction).
  • Weakness: Lower ROIC (5.2%) vs. Sunway (8.1%).

• Disruptive Threats:

  • Digital construction: New entrants like Singapore’s Surbana Jurong adopting AI-driven project management.

• Strategic Differentiation:

  • Port digitization: MYR 200M investment in IoT for cargo tracking (ahead of peers).

Valuation Assessment

• Intrinsic Valuation:

  • DCF assumptions: WACC 9.5%, terminal growth 3.5%. NAV: MYR 2.30 (8% below current price).
  • Peer multiples: EV/EBITDA of 8.7x vs. sector median of 7.2x suggests overvaluation.

• Valuation Ratios:

  • P/B of 0.8x is attractive vs. 1.2x sector average, but high P/E (22x) offsets this.

• Investment Outlook:

  • Catalysts: MYR 3B+ infrastructure tender wins expected in H2 2025.
  • Risks: Debt refinancing (MYR 1.2B due in 2026).

• Target Price: MYR 2.70 (7.5% upside), based on sum-of-parts (property: MYR 1.10/share, ports: MYR 0.60/share).

• Recommendation:

  • Buy: For value investors (P/B <1, 3.1% dividend yield).
  • Hold: Await clearer debt reduction signals.
  • Sell: If ROIC falls below 4%.

• Rating: ⭐⭐⭐ (Moderate risk with selective upside).

Summary: IJM offers steady growth but trades at a premium. Property and port segments are bright spots, while construction margins need improvement. Debt levels and execution risks warrant caution.

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