Investment Highlights

• We maintain our forecasts, HOLD call and FV of RM2.22, following the award by Jendala Mayang Sdn Bhd of contiguous bored pile works worth RM18mil to Econpile.

• Our FV is based on 13x CY18F EPS of 17.1sen, 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 is Econpile's first job win for FY18 (FY June). Given the relatively small value of the contract, Econpile's outstanding order book is relatively unchanged at RM1.2bil (Exhibit 1).

• Our forecasts assume a more normalised job wins of RM600mil annually in FY18-20F. Recall, FY17 was a bumper year for Econpile with total job wins of RM1.19bil, compared with RM662mil in FY16.

• While the value of the contract is small, it is significant as it marks the beginning of a series of piling and foundation jobs of Pavilion Damansara Heights Phase 2 that will be dished out over time, we believe, with a total value of about RM200mil. Also recall, Econpile clinched the piling and foundation package for Pavilion Damansara Heights Phase 1 worth RM570.4mil in Feb 2017.

• We continue to like Econpile for its strong earnings visibility backed by the bright prospects of the piling/foundation segment coupled with its 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 - 21 Sept 2017