KUALA LUMPUR: IJM Corp Bhd's proposed initial public offering (IPO) of its construction arm next year could unlock up to RM4 billion in equity value.
This will provide a significant boost to IJM's ambitious RM3 billion shareholder distribution plan over the next three years, analysts said.
They estimated the listing could generate about RM1.2 billion proceeds for IJM, accounting for a sizeable portion of the RM3 billion capital earmarked for distribution to shareholders.
The listing is a "clear value unlocking catalyst", they said, adding that the market is ascribing a conglomerate discount to IJM's engineering and construction franchise despite its scale and order book strength.
IJM has five main business verticals with an international presence: construction, property development, manufacturing and quarrying, ports and toll concessions.
CGS International said the planned listing by September next year will have a potential equity value of RM3 billion-RM4 billion.
The planned IPO will involve IJM's Malaysian and Singapore businesses with a combined order book of RM9.65 billion as at March, it added.
"The listing timing would be important and needs to coincide with the still buoyant data centre theme and eventual rollout of some large government infrastructure.
"Additionally, to remain competitive, (IJM's construction) pre-tax margins need to move to the higher end of its normalised six-nine per cent range," the firm said.
TA Securities estimated the planned IPO could value the company's construction business at around RM2.6 billion.
This is based on IJM's financial year 2026 earnings estimates and a price-earnings multiple of about 17 times, which are broadly in line with regional construction peers.
The planned listing, analysts said, will effectively carve out IJM's construction division into a pure-play entity.
This will allow investors to assess its earnings quality, margins and growth trajectory independently from the company's toll roads, property and industrial assets.
"This is the segment with the most visible earnings turnaround and strongest execution momentum," an industry observer noted.
He added that a standalone listing will improve valuation transparency and allow for a more appropriate sector re-rating.
The construction arm is understood to be supported by a sizeable order book of about RM14.7 billion, with exposure to domestic infrastructure works, industrial facilities and fast-growing data centre-related contracts.
The mix is increasingly important as Malaysia's construction sector shifts towards higher-margin industrial and electrical and mechanical works rather than traditional civil engineering projects.
Kenanga Research said the construction listing is expected to be executed once regulatory approvals and market conditions are aligned.
The firm said the IPO could be completed within a roughly 12-month execution window once formalisation is complete, although timing remains dependent on market sentiment.
Market observers said the listing structure is likely to follow a partial sell-down model.
IJM will retain a controlling stake post-IPO while monetising a minority portion of the construction business to establish market pricing and unlock immediate proceeds.
Following the IPO, analysts expect IJM to use proceeds - together with asset recycling gains and toll road monetisation - to support a targeted RM3 billion capital return programme over three years.
This includes a mix of dividends and potential special distributions.
CIMB Research said the construction listing would serve as the "first and most important step" in IJM's broader capital management roadmap, as it creates both valuation visibility and liquidity that can support subsequent shareholder payouts.
However, analysts cautioned that execution remains key, particularly the timing of the IPO, investor appetite for construction-sector listings and the ability to sustain earnings momentum post-spin-off.Despite these risks, sentiment remains constructive.
They pointed to IJM's improving construction pipeline, growing exposure to data centre projects and stronger infrastructure demand as supporting factors for a potential re-rating once the listing framework is finalised.