Econpile Holdings Bhd Oct 24 (RM1.88)

Maintain buy for Econpile with an unchanged TP of RM2.02: Econpile Holdings Bhd has clinched its first infrastructure project, namely the Mass Rapid Transit II (MRT II)  in financial year 2017 (FY17), worth RM43.5 million. This is the second job for FY17, accounted for 40% of our job win assumption of RM800 million in FY17. With this project, Econpile’s outstanding order book stands at approximately RM900 million around 1.95 times of FY16 revenue. We have already imputed this project as part of our FY17 order book replenishment target. As such, there is no change to our earnings projection. 

Assuming the commencement of works is in the next month, the project is targeted to complete in October 2018 which will take about 24 months.

Assuming a profit before tax (PBT) margin of 11%, we expect this project to contribute RM4.8 million, spread over two years to the group’s PBT.

With the latest project, we remain positive about the group’s outlook as this will enable them to continue playing a pivotal role in robust development particularly in the Klang Valley. The other projects that are near finalisation are the mixed development project such as Pusat Bandar Damansara namely Pavilion Damansara Heights and Jalan Pudu which is the Bukit Bintang City Centre.

We note that the group is also eyeing piling works for Light Rail Transit Line 3, The Sungai Besi-Ulu Kelang Elevated Expressway, and Damansara-Shah Alam Highway projects. Leveraging on its proven track record and expertise in the top-down approach for the underground works, we believe the group is in a good position to secure these projects. These definitely will strengthen investor confidence and sentiment towards the company. — BIMB Securities Research, Oct 24

This article first appeared in The Edge Financial Daily, on Oct 25, 2016. Subscribe to The Edge Financial Daily here.