Investment Highlights

• We maintain our HOLD call, forecasts and FV of RM2.22, following the award by Gabungan Strategik Sdn Bhd (a unit of Bursa Malaysia-listed Gabungan AQRS) to Econpile for bored piling and general infrastructure works for Package GS04 of LRT3 worth a total of RM208.7mil.

• 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 third job win for FY18 (FY June), boosting its YTD (FY June) contracts secured to RM275mil, and its outstanding order book to RM1.5bil 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 - 17 Nov 2017