· Econpile Holdings Bhd announced on Bursa Malaysia yesterday that its whollyowned subsidiary, Econpile (M) Sdn Bhd (EMSB), was served a notice of arbitration from IRDK Ventures Sdn Bhd.

· This pertains to a piling job worth RM8.7mil in Puchong that IRDK had awarded to EMSB a year ago.

· Note that on 3 June 2015, IRDK had served on EMSB a notice to determine the contract. EMSB has disputed the alleged determination.

· On 5 June, EMSB then served a notice of adjudication to IRDK to refer the disputes arising from EMSB’s payment claim for the contract. The claims amount to ~RM4mil as well as interest costs and other reliefs that the adjudicator may deem fit. The adjudication submission was made and is pending decision.

· On 28 Sept, IRDK then submitted a notice of demand upon EMSB demanding the sum of RM796,500 being “alleged liquidated and ascertained damages” and further sum of ~RM119mil being “alleged loss of profit due to non-performance of the contract”. Following this, the notice of arbitration was served on 7 Oct.

· Econpile is currently in discussions with its solicitors and will proceed with the arbitration process.

· We understand that the arbitration process may take three months. We do not expect any material impact from this as we are hopeful that the decision will be favourable for EMSB. Furthermore, EMSB had already made the necessary impairment for doubtful debts amounting to ~RM4mil in FY15 ended June.

· We maintain our BUY call and fair value of RM1.50/share. Econpile is a beneficiary of sustained demand for piling works; tender book remains healthy at ~RM1bil. As at end-June, it had an outstanding book of RM512mil. Valuations are undemanding at 9x FY16F PE currently.

Source: AmeSecurities Research - 9 Oct 2015