Summary

• We attended Econpile Holdings Bhd's post-results briefing and came away feeling re-assured on the company’s prospects, moving into FY22f. This will be supported by its outstanding orderbook of RM830.0m as of FY21.

• We gather that Econpile’s tenderbook is at approximately RM500.0m with the bulk of it located in Malaysia. Moving forward, the management has set an internal target orederbook replenishment of about RM300.0m for FY22f, whilst undertaking minimal CAPEX. While tenders appear to remain sluggish at current juncture, we expect the tabling of Budget 2022 will then paint a clearer picture towards the construction industry.

• Once again, we-reiterated that Econpile's outstanding orderbook of approximately RM830.0m as of FY21, which translates to an orderbook-to-cover ratio of 2.0x against FY21 revenue of RM420.4m will provide earnings visibility over the next 2 years.

• Going forward, the progress of current projects is on course for gradual improvement. Meanwhile, there were also signs of revival in the property market with several soft launches taking place. This bodes well for future property-related piling and foundation works for Econpile.

• Meanwhile, we also gather that 85.0% of Econpile’s workers are vaccinated to-date and works for all sites have resumed. Therefore, we opine that a recovery is largely on the cards, barring any unforeseen circumstances. Still, the shortage of workers continues to pose a challenge to the general construction sector.

• As of FY21, Econpile maintained a healthy balance sheet with a net gearing of 0.1x. This allows further room the group to tap into external financing, if required over the foreseeable future. We expect net gearing level to remain at 0.1x for both FY22f and FY23f.

• We also note that Econpile is focusing on the health and safety of the workers as part of their ESG-related practices. At the same time, Econpile is also ensuring that the group is strictly adhering to the International Labour Organisation (ILO) regulations with their foreign workers.

Valuation & Recommendation

• We made no changes to our earnings forecast and we maintained our HOLD recommendation on Econpile with an unchanged target price of RM0.36. Our target price is derived by ascribing a target PER of 15.0x to its FY22f EPS of 2.4 sen.
• Risks to our recommendation and target price include the ability to achieve our targeted orderbook replenishment rate. Higher raw material prices and labour cost would potentially dent margins and vice versa. The pace of project execution could also determine Econpile’s efficiency to deploy existing machineries for future orders.

Source: Mplus Research - 4 Oct 2021