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

- The group reported net earnings of RM9.6mil for 1QFY15 on the back of RM106mil in revenue. Sequentially, earnings grew by an impressive ~50% on the back of a slimmer 6.5% topline growth.

- The improved earnings can be attributed to a 2.5ppt net margin improvement to 8.9% (from 6.4% in 4QFY14) due to better product mix.

- The earnings were in line with our estimate (making up 21% of full-year FY15F) but surpassed consensus expectations.

- The group declared a first interim dividend of 1.0 sen (yield: 1%). We expect the group to pay out at least another dividend during the remaining part of the year given its 20% payout policy (our FY15F estimate: 1.8 sen/share).

- Revenue had increased by 6.5% QoQ due mainly to higher recognition from jobs in hand. Recall that the group has secured RM200mil worth of new jobs in FY15F thus far (FY14: RM522.6mil). As at end-Sept 2014, it had an outstanding order book of RM480mil (end-June: RM450mil).

- We expect more jobs to flow through given the demand for piling jobs in the market (tender book: ~RM2bil). We maintain our conservative new order book win of RM320mil for FY15F for now.

- Sequentially, EBIT margins improved by ~2ppts to 12.3%. The net margin expansion is in line with our assumed 2.6ppts net margin improvement (to 10%) for FY15F.

- We expect margins to further improve as the group completes the KVMRT jobs within the next two months. Notably, the V6 package is on schedule for completion in Dec. Works for V1 had also recommenced (after a 2-month hiatus) with completion expected at end-Jan.

- The completion of the KVMRT jobs will free up capacity for property-related jobs that yield higher margins. Also note that progress billings from its new jobs have not kicked in due to higher operating costs at the initial stage.

- We also expect wider investor interest as Econpile was added to the SC’s shariah-compliant list last week.

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

Source: AmeSecurities