- We maintain BUY on Econpile Holdings Bhd with a fair value of RM1.28/share – pegged to a PE of 15x FY15F EPS.

- Econpile recorded a net profit of RM31mil for FY14, an 11% rise from RM28mil last year. This was in line with our expectations.

- This was on the back of an 8% topline growth to RM419mil from RM386mil the previous year. About 69% of the revenue came from property development projects.

- Sequentially, 4QFY14 revenue grew by 14% to RM99mil due to higher contributions from property development projects compared to infrastructure ones. Earnings similarly grew by 16%.

- EBITDA margin improved by ~1ppt YoY to 14.6%. Excluding a one-off cost recognition of RM3.7mil for its employees benefit plan, core net profit margin improved by ~1ppt to 8.3%.

- Econpile did not propose any dividend for FY14. We believe that the group will reward shareholders moving forward as it has adopted a policy to pay out at least 20% of PAT.

- We expect net margins to improve by 1-2ppts per annum as it improves its product mix. The group is looking to secure more building jobs (instead of infrastructure jobs) that yield better margins.

- This is on the back of its outstanding order book of RM600mil, out of which only 8% are infrastructure-related jobs. Notably, the group is scheduled to complete the KVMRT1 jobs by Oct. This will free up 10-12 machineries for new building jobs.

- We are forecasting an order book replenishment of RM320mil per annum for FY15F and FY16F. It currently has a tender book of RM2bil.

- Recall that the group has secured three building contracts worth a total of RM136mil since its listing on 30 June. We expect more jobs to flow through.

- The group is in a net cash position as part of the IPO proceeds has been utilised to repay bank borrowings. Capex will be minimal at around RM10mil per annum.

- Econpile is a strong beneficiary of rising jobs flow, with strong execution and concerted efforts to improve margins. Maintain BUY.

Source: AmeSecurities