Investment Highlights

• We maintain our HOLD call, forecasts and FV of RM2.22, following the award by Malaysia Resources Corporation Bhd to Econpile of piling and basement works for Parcel B of mixed development 9 Seputeh along Old Klang Road, Kuala Lumpur, worth RM48mil.

• Our FV is based on 13x CY18F EPS of 17.1 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 is Econpile’s second job win for FY18 (FY June), boosting its YTD (FY June) contracts secured to RM66mil, and its outstanding order book to RM1.25bil based on our estimates (Exhibit 1).

• We are keeping our forecasts which assume Econpile will secure RM600mil worth of new jobs annually in FY18-20F. Recall, FY17 was a bumper year for Econpile with total job wins of RM1.19bil, compared with RM662mil in FY16.

• 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 - 9 Oct 2017