- We maintain BUY on Econpile Holdings Bhd with an unchanged fair value of RM1.50/share – pegged at 14x FY16F PE.

- Econpile announced on Monday that it has secured a RM120.5mil piling and basement works contract for the Menara Felcra mixed development on Jalan Semarak, Kuala Lumpur.

- The contract was awarded by WZR Property Sdn Bhd to Econpile’s wholly-owned subsidiary, Econpile (M) Bhd.

- The contract involves the provision of bored piling and diaphragm wall works as well as the construction of four basement levels for the project.

- The duration of the contract is 18 months and it is slated to be completed by May 2017. As such, the contract will contribute to the group’s earnings in FY16F and FY17F.

- The contract is part of the development of the new HQ for Felcra Bhd, which will comprise a 35-storey office tower, a 43-storey residential tower, as well as a six-storey commercial and retail block.

- This is the first major contract announced by Econpile for FY16F. It is within our new order book replenishment of RM320mil for FY16F (FY15: RM490mil).

- With the latest win, Econpile’s outstanding order book is currently ~RM590mil (end-June: RM512mil).

- We expect more awards to flow through given its tender book of ~RM1bil. Prospects remain bright as demand for piling remains resilient for upcoming property jobs as well as infrastructure works. Econpile stands a good chance to secure piling jobs for MRT2 and LRT3, given its experience in the MRT project (Packages V1 and V6: ~RM200mil).

- Econpile’s 1QFY16F results are slated for release on 27 Nov. Margins may be sustained at the current levels (4Q15 net margin: 13.5%), or even surprise on the upside due to better efficiency and lower raw material prices. Recall that margins had improved from 5% to 11% from FY11 to FY15.

- Maintain BUY. Valuation-wise, it is currently trading at 10x FY16F PE. Econpile has a 20% dividend payout policy; it declared dividends of 1 sen and 1.5 sen in 1Q and 3Q, respectively, for FY15. Overall, continued demand for piling jobs should sustain momentum given Econpile’s expertise and leading position in the industry.

Source: AmeSecurities Research - 11 Nov 2015