Analysts See Strategic Upside in Sunway’s RM11 Billion IJM Takeover, Though Valuation Draws Mixed Views

Kuala Lumpur — Market analysts are broadly constructive on Sunway Bhd’s RM11 billion proposed acquisition of IJM Corporation Bhd, citing stronger earnings prospects, greater diversification into infrastructure assets, and improved long-term positioning. However, some research houses have raised concerns over the offer price and acceptance risk.

According to CGS International, the transaction could significantly enhance Sunway’s market standing and help narrow its long-standing holding company discount, especially ahead of the anticipated listing of Sunway Healthcare Group in early 2026.

On a pro forma basis, CGS estimates the enlarged Sunway group would command total assets of approximately RM53 billion, representing a 69% increase from current levels. Shareholders’ equity would rise to RM26 billion, while net debt would stand at RM13 billion, translating into a manageable net gearing ratio of 0.5 times.

The merger would also materially expand Sunway’s development and construction footprint. Its Malaysian construction order book is projected to grow to RM14.8 billion, while its land bank would increase to 5,685 acres, strengthening exposure to industrial land in Selangor and commercial development opportunities across Kuala Lumpur. Gross development value would approach RM118 billion, nearly double its existing scale.

Earnings Accretion and Infrastructure Exposure Support Strategic Case

Hong Leong Investment Bank Research (HLIB) expects the acquisition to lift Sunway’s earnings per share by 17.8% in FY2026 on a pro forma basis, even before factoring in potential synergies. This uplift is attributed to Sunway’s higher valuation multiple and IJM’s substantial construction and infrastructure portfolio.

CIMB Securities echoed the positive strategic rationale, highlighting increased diversification into infrastructure assets such as highways, ports, and long-tenure concessions, alongside operational synergies across property development and construction. These capabilities are expected to complement Sunway’s existing portfolio of commercial property in KL and large-scale township developments.

However, CIMB noted that the transaction is likely to be only marginally earnings-accretive, regardless of whether minimum or full acceptance thresholds are met. It also pointed out that the RM3.15 per share offer represents a discount to its target valuation for IJM.

Mixed Views on Valuation and Shareholder Acceptance

MBSB Research estimates that post-consolidation earnings improvement would be modest at around 1%, although the enlarged equity base would reduce overall gearing to approximately 0.5 times, strengthening the balance sheet.

Meanwhile, RHB Investment Bank emphasised the strategic advantages of scale, deeper infrastructure exposure, and stronger execution capability. The bank views the enlarged Sunway group as a more diversified proxy for domestic economic growth, particularly in construction-linked sectors such as industrial property development in Subang and factory projects in Puchong.

RHB also noted that the transaction would remove a major competitor from the construction space, placing Sunway Construction Group in a stronger position when bidding for large-scale infrastructure and commercial projects.

In contrast, Kenanga Research remains cautious, flagging the offer price as a potential obstacle. It argued that the RM3.15 valuation may not fully reflect IJM’s infrastructure assets and future earnings potential. The research house also highlighted that the relatively small cash component and substantial issuance of new Sunway shares may reduce the appeal for IJM shareholders.

Market Consensus Remains Balanced

Currently, HLIB and RHB maintain ‘buy’ recommendations on Sunway, while CIMB and MBSB hold neutral stances. Kenanga continues to rate the stock as ‘underperform’.

Based on Bloomberg data, the stock is now covered by three ‘buy’, nine ‘hold’, and one ‘underperform’ calls, with an average 12-month target price of RM5.71 per share.

Overall, analysts agree that while valuation debates remain, the proposed acquisition significantly strengthens Sunway’s long-term positioning across construction, infrastructure, office space in Bukit Jalil, and industrial property in Selangor, reinforcing its role as one of Malaysia’s most diversified property and infrastructure groups.