Summary

• Econpile Holdings Bhd's (ECONBHD) 4QFY22 remained in the red with net loss at RM13.3m vs. a net profit of RM1.0m recorded in the previous corresponding quarter, dragged by provisions of expected losses and higher material prices. Revenue for the quarter, however, rose 5.1% YoY to RM98.5m.

• For FY22, cumulative net loss stood at RM40.7m; below our net loss projection at RM29.2m and consensus net loss of RM12.0m. The variance is mainly due to the weaker margins from the elevated construction material costs.

• We gather that as of FY22, cash balances at RM53.5m and net gearing at 0.2x suggest that there is still some room to tap into external financing to fund working capital purpose in bid to overcome the tough operating landscape.

• Meanwhile, ECONBHD has bagged contract for the piling work at Immigration, Custom and Quarantine Complex (ICQC) for Rapid Transit System Link (RTS Link) between Johor Bahru and Singapore for RM40.0m to be delivered in 13 months from 1st September 2022. This brings orderbook replenishment to for FY23f to about RM50.0m, making up to 2.0% of our orderbook replenishment target of RM250.0m for FY23f. FY22 wins was at RM155.6m.

• As of end-FY22, ECONBHD is equipped with an unbilled construction orderbook of approximately RM443.9m; representing an unbilled orderbook-to-cover ratio at 1.2x against FY22 revenue of RM373.4m. This will provide sustain their revenue over the next two years.

• We expect the construction industry to remain beset by the rising costs of labour and raw materials. The price index per unit of steel & metal section increased 15.8% YoY in July 2022, according to the building and structural work, department of statistics Malaysia.

• On a brighter note, their Cambodia operations are progressing smoothly (50.0% completion), while 250 foreign workers have gotten approval, waiting for arrival. This will provide some alleviation to the acute labour shortage.

Source: Mplus Research - 30 Aug 2022