Investment Highlights

• We maintain our forecasts, HOLD call and FV of RM2.13, following the award of piling, basement and substructure works valued at RM48.5mil for a mixed high-rise office project along Jalan Conlay, KL, by Pembinaan Kery Sdn Bhd.

• Our FV is based on 13x FY18F EPS of 16.4 sen, at a slight premium to our 1-year forward target PE of 10-12x for small-cap construction stocks to reflect a relatively less competitive piling segment vis-à-vis general contracting.

• The latest contract has boosted Econpile’s YTD (FY) job wins to RM1.19bil and its order backlog to RM1.4bil (Exhibit 1).

• We are keeping our forecasts which assume Econpile would secure RM1.2bil new jobs in FY17F, before normalising to RM600mil annually in FY18F and FY19F. Recall, Econpile secured RM627mil new jobs in FY16.

• Econpile is a good proxy to the booming piling/foundation segment underpinned by current mega infrastructure projects such as MRT2, Pan Borneo Highway, SUKE and DASH, as well as those that are getting off the ground over the short to medium term such as LRT3, ECRL and KL-Singapore HSR. Its strong earnings visibility is backed by a sizeable order backlog which will keep it busy for the next 12-24 months. The entry barrier to the sector is high given the high costs of equipment and machinery as well as the limited availability of experienced operators. However, we believe the current share price has very much reflected Econpile’s fundamentals

Source: AmInvest Research - 23 May 2017