Investment Highlights

• We maintain SELL on Econpile Holdings (Econpile) with an unchanged fair value (FV) of RM0.11/share based on FY24F PE of 9x, in line with our benchmark for small-cap construction stocks. There is no FV adjustment for ESG based on our 3-star rating.

• Econpile has received a letter of acceptance of US$9.5mil (RM43.8mil) from Odom Living to undertake bored pile and diaphragm wall works for Odom development at Norodom Boulevard, Sangkat Tonle Bassac, Phnom Penh, Cambodia.

• The development comprises 2 towers made up of 45-floor office spaces and 22-floor residential spaces which are connected by a 5-floor podium with commercial spaces.

• The project will be carried out over 8 months from 1 Jun 2023 onwards, contributing a total EBIT of RM4mil, with the bulk of it to be recognised in FY24F.

• YTD new job wins amounted to RM267mil, which is close to our FY23F contract awards of RM250mil. With only 1-month left until its financial year end, we make no changes to earnings estimates.

• This win raises the order book to RM410mil – 1.2x FY24F revenue. Other notable wins include the ICQC @ RTS Link (RM40mil), Berjaya Residence (RM25mil), Kota Bahru Medical Centre (RM24mil) and Bangsar Hill Development (RM21mil).

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

Source: AmInvest Research - 1 Jun 2023