- We maintain BUY on Econpile Holdings with an unchanged fair value of RM1.40/share – pegged to 15x FY15F PE.

- The group yesterday announced that it had secured a RM54.5mil piling job from Flora Development Sdn Bhd. The job entails earthworks, piling and basement substructure works for a service apartment-cum-office development in Bandar Puteri Puchong, Selangor.

- The project is part of the 72-acre IOI Rio City mixed development project with a gross development value of RM6bil.

- The duration of the job is 18 months and is expected to be completed by Sept 2016.

- This is the seventh major piling job that Econpile has secured since its listing last June. With this job, Econpile has secured RM384mil worth of new jobs for YTD FY15F ending June (0.9x of FY14’s revenue).

- With this job, we estimate Econpile’s outstanding order book at ~RM530mil, which will keep the group busy over FY15F/16F.

- Notably, Econpile has been securing property-related jobs which yield higher margin than that of infrastructure jobs.

- We expect margins to improve further as the group book in higher progress billings from its property jobs. It had completed the two KVMRT1 packages in Feb, which had lower margins (due to it being a greenfield project).

- Econpile’s net margin had expanded to 10.2% in 2QFY15 (from 8.9% in 1Q, and 6.4% in 4QFY14). Our investment thesis of improving margins for FY15F remains on track – at an estimated net margin of 10.2% (+2.8ppts from 7.4% in FY14F; 1H15: 9.6%).

- For the 1HFY15, property-related jobs contribute to 90% of Econpile’s total revenue with the rest mainly from KVMRT1 jobs. Gross margin for property jobs recognised in 1H was at 19% (vs. infrastructure’s gross margin of 4%).

- We maintain our numbers as our new order book assumption of RM400mil for FY15F is achievable. Prospects remain bright with a tender book of ~RM1bil.

- With the KVMRT2 packages completed, Econpile will have more capacity to bid for property-related jobs. Econpile is one of the few piling specialists with a market share of ~13%. It is currently trading at 11x PE. Maintain BUY.

Source: AmeSecurities Research - 27 Mar 2015