Investment Highlights

• We maintain SELL on Econpile Holdings (Econpile) with a higher fair value (FV) of RM0.13/share (vs. RM0.12/share previously) based on 9x FY24F PE, in line with our benchmark for small-cap construction stocks. There is no FV adjustment for ESG based on our 3-star rating.

• We raise our FY23F order book replenishment assumption to RM250mil from RM200mil as Econpile’s YTD job wins of RM223mil have exceeded our estimate. As a result, our FY23F-FY24F net profit for the group is now higher by 7%.

• Econpile has received a letter of award of RM20.8mil from Bangsar Hill Development to undertake earthworks, piling, pile cap, basement slab and reinforced concrete ramp works for Phase 1B1 (Block B) – a 62-storey apartment block with 410 units and Phase 1B2 (Block C) – a 49-storey apartment block with 392 units at Bangsar, Kuala Lumpur.

• The project will be carried out over 10.5 months from 6 May 2023 onwards, contributing a total EBIT of RM2mil, with the bulk of it to be recognised in FY24F.

• YTD new job wins amounted to RM223mil, bringing the order book to RM400mil – 1.3x FY23F revenue. Other notable wins include the ICQC @ RTS Link (RM40mil), Berjaya Residence (RM25mil) and Kota Bahru Medical Centre (RM24mil)

• Challenges include (i) weaker-than-expected recovery of job flows; (ii) eroding profit margins as building material costs rise and labour shortage persists; and (iii) shelving of mega projects.

• The stock currently trades at a pricey 16.2x FY24F PE, above our benchmark of 9x for small-cap construction stocks. Rerating catalysts include major job wins in Cambodia or Malaysia.

Source: AmInvest Research - 15 May 2023