Analysis on :

IJM CORPORATION BHD

SECTOR : CONSTRUCTION
YEAR : 2012-2016
 1) Liquidity Ratio
Current assets
Current Ratio Current liabilities

Current Ratio
Represents the ability of the company to cover 3.5
its short term obligations 2.98
3
2.6
Over the years, only 2013 was less than 2 2.5 2.21
while the others increased significantly 2.06
1.91
2

Industry median is lower than IJM company 1.5

1.19
1
Therefore, IJM basically has sufficient amount
of liquidity available to pay the current liabilities 0.5

0
2012 2013 2014 2015 2016 Industry
median
 Cash + Marketable securities + Accounts receivable
Quick Ratio Current liabilities

Indicates better level of liquidity compared to current

ratio (the assets used are highly liquid) Quick Ratio
1.2 1.13
Over the years, the ratio decreased substantially but
0.97 0.94 0.96
1 0.89
inclined slightly in year 2016 0.75
0.8
Industry median is less than IJM company which
0.6
considered that IJM is doing fine in managing its 0.4
liquidity 0.2
0
2012 2013 2014 2015 2016 Industry
median
 Account receivables Net Sales
turnover Average account receivables

Measures the efficiency of the company to

collect its account receivables Accounts Receivable Turnover
2.89
Higher ratio indicates shorter time of 3
2.5 2.6
2.4 2.3
receivables collection 2.5 2.19
The first three years, the ratio increased 2

before decreased significantly in year 2015 1.5

and 2016 1

Industry median is higher than IJM which 0.5

shows the inefficiency of the company to 0

2012 2013 2014 2015 2016 Industry
convert the receivables in timely manner median
Overall Liquidity Analysis
1. The liquidity ratio shows IJM company is in good terms based on its
financial strength

2. The company has sufficient amount of assets to be converted into cash

within short times

3. The company is doing fine as compared to the industry median except for
account receivables turnover

4. Account receivable turnover industry is higher than the company but still its
quick ratio is able to cover up the companys liquidity

5. Resolution : IJM have to revise back their credit policy in order to increase
the efficiency in receivables collection
2) Profitability Ratio
Net income before non-controlling
interest,equity income & non-recurring items
Net Profit Margin Net Sales
Measure how much earning generated
from sales Net Profit Margin (%)
20
Ratio substantially decreased from 2014 17.91
17.19 16.78
to 2015 but recover in 2016, performing
slightly better than the industry
15
13.09
Indicates good financial condition, IJM 12.18 12.06
have high profits to distribute dividends,
enough profit to pay back its loan 10

Despite decreasing revenue, IJM

recorded high net income mainly due to
lower expenses incurred 5
2012 2013 2014 2015 2016 industry
median
 Net Income before Noncontrolling
Return on Asset interest & Nonrecurring items
Average Total Assets
The ratio was quite stable in 2012 to
2013 before significantly declined in
2015, however ROA gradually increases Return on Asset (%)
reaching 4.46% in 2016 7 6.42
6 5.58
As compared to the industry, ROA is 5 4.46
slightly low 4.16
3.88 3.74
4
3
Increasing trend indicates that the
company is performing better in using 2
their assets to generate income. 1
0
IJM is recommended to enhance their 2012 2013 2014 2015 2016 Industry
Median
assets management efficiency to create
healthier return

Return on Equity
Measures how efficiently a firm can
use the capital from shareholders to
generate profits and grow the
company
Net Income before Non-controlling
interest & Nonrecurring items
Average Shareholder Equity
Return on Equity (%)
14 13.24

12
10
Since the significant drop in 2015, 10 8.9
8.17 7.88
ROE increases from 2015 to 2016 8
7.7

but performing a bit lower than 6

industry 4

2
The ratio improves over the last two
0
recent years, indicating better 2012 2013 2014 2015 2016 industry
median
management in handling equity to
generate income
Overall Profitability Analysis

IJM profitability performance is IMPROVING

It managed to achieve net profit above average despite

slight decrease in revenue

IJM continuously improving in their asset and equity

return, recovering from a drastic drop in 2015

IJM is recommended to increase its revenue by

efficiently make use of their asset and equity capital
3) Debt Ratio
Total Liabilities
Debt to Total Assets Total Asset

The ability of the company to pay its Debt to Total Asset

long-term debt 1

0.8
About half of the IJMs assets were
financed by the creditors 0.6 0.5 0.52 0.52 0.51 0.48
0.4
Stable - IJM Corporation just take a 0.2
small amount of debt or maybe it did
0
not pay much of it 2012 2013 2014 2015 2016
 Total Liabilities
Debt to Equity Ratio Total Equity

The ability of the company to pay its

Debt to Equity
long-term debt & protection of
1.2
creditors in case of insolvency 1.07 1.06 1.06
1
1 0.94
0.88
The industry has a better paying 0.8
ability compared to IJM Corporation
as the lower the ratio, the better the 0.6
position of the debt in a company. 0.4

0.2

0
2012 2013 2014 2015 2016 Industry
Median
 Times Interest Earned
Earnings Before Interest & Taxes
Interest Expense
Ability of the company to pay its
interest obligation
Times Interest Earned
The higher the ratio, the less the risk 9
7.73 7.69
that the company could not pay its 8
7 6.15
interest obligation 6 5.63 5.33
5
4
IJM Corporation has a good coverage 3
3
of its interest payment, = may apply 2
for refinancing 1
0
2012 2013 2014 2015 2016 Industry
Median
 Altman Z-score Z = 0.012(WC/TA) + 0.014(RE/TA)
+0.033(EBIT/TA)+0.06(MVE/BVTD)
+0.010(S/TA)
To predict the bankruptcy of a
company Z-Score
16 14.96
Z-score more than 1.8 is 14
favoured 12
10 9.02
Financially strong for all years 8
7.74
6.79 6.68
6
4
2
0
2012 2013 2014 2015 2016
Overall Debt Ratio Analysis
Half of assets are in terms of debt

IJM capital intensive company, it is expected to have a high

debt to equity ratio

High earnings before interest and tax good sign for creditor

Low level of bankruptcy

4) Market Ratio
Net Income Preferred dividends
Weighted Average number of Common Shares
Earnings per Share Outstanding

Measures the amount of Earning Per Share (RM)

companys profit allocated for each 0.7

common shares outstanding. 0.6

0.58

0.5
Reflects the profitability of a 0.4
2012
2013
company. 0.29 0.3
2014
0.3
0.22
2015
0.2 0.15
Distributes more profit to the 2016

0.1
shareholders.
0
2012 2013 2014 2015 2016

Impact on the stock price. Series 1 0.29 0.3 0.58 0.15 0.22
Price/Earning Ratio Market Price per Share
Diluted EPS before Nonrecurring Items

How much the market is willing to pay Price per Earning Ratio (times)
for a stock based on its current 30
earnings. 24.00
25

Higher PER = Better performance in 20 2012

16.05
future & Investors willing to pay more. 15
2013
2014
9.71 9.08
For every ringgit of earnings, the 10
5.29
2015
2016
investors are willing to pay more in 5
2015.
0
2012 2013 2014 2015 2016
Series 1 9.71 9.08 5.29 24 16.05
Dividend Payout Dividend per Common Share

Diluted EPS before Non-recurring items

Indicates the portion of current
earnings per common share being paid Dividend Payout (%)
out in dividends. 120 100.00

100
Influence the decision made by the
investors. 80 2012
2013
60 43.1 45.00
Investors assumption on the stable 41.38 43.33 2014
40 2015
dividend payout.
20 2016

0
2012 2013 2014 2015 2016
Series 1 41.38 43.33 43.1 100 45
Dividend Yield Dividend per Common Shares

Market Price per Common Shares

A higher amount indicates higher Dividend Yield (%)

earnings share with the 9 8.14
shareholders. 8

7
The investors concern on this ratio. 6
2012
4.7 4.17
5 4.26 2013
Investors get lower compensated 4 2014
for their investments. 3
Dividend per Common Shares2.83
2015
Market Price per Common Shares
2 2016

0
2012 2013 2014 2015 2016
Series 1 4.26 4.7 8.14 4.17 2.83
Assumptions & Crucial Factor
1. Malaysia Budget 2017
- Huge allocation for construction sector RM260.8B (3.4% increases)
- Analyst estimates 8.3% growth in construction sector
asia.nikkei.com

2. Assumption made:
- IJM would improve / maintain its current performance
- More projects developments and infrastructures are expected to be
offered in 2017
- Opportunity for IJM to prove its competency and competitiveness

3. Challenges:
- Instability of Malaysia Ringgit currency
- Increase in tax (cost for imported raw materials)
- Economic uncertainty
- Shortage of construction workers
 Recommendation & Conclusion
1. RECOMMENDATION

Revise its long-term business sustainability planning in order to maintain its

competitiveness in this industry

The company is expected to outperform the market.

- IJM is reported to have a dividend of 0.07MYR IN 2016
(6.67 % decrease from the previous year)
- The analyst expects the company to achieve dividends of
0.08MYR for upcoming years, with an increase of 17.14%

2. CONCLUSION
- IJM shows a good performance based on their historical track record
- Investors are encourage to invest
- Creditors should not worry much : IJM less risky, further from insolvency
THANK YOU