• Econpile posted a strong 9MFY17 net profit which grew 22.4% yoy to RM60m, to be broadly in-line with our estimates at 67.3% and consensus’ at 72.3%.

• 3QFY17 core grew by 23.6% yoy to RM162.3m underpinned by higher order book secured.

• An interim dividend of 3.0sen/share was declared, bringing total dividend declared to 4.5 sen/share in FY17 so far.

• Maintain BUY with RM2.90 TP based on 14.5x FY18F EPS. We like the stock for its dominant position in substructure works and strong asset turnover which could translate to higher dividend payout.

Record year in the making

Econpile’s 9MFY17 net profit of RM60m grew 22.4% yoy and was broadly in-line within ours and consensus estimates, accounting for 67.3% and 72.3% respectively. We expect more meaningful contribution in subsequent quarters in view of the 2 projects that recently won.

Yoy surge driven by strong orderbook

3QFY17 earnings grew 23.6% yoy and 3.5% qoq driven by its strong orderbook which currently stood at RM1.46bn as at Mar 2017. EBITDA grew 29% yoy higher percentage of completion of ongoing projects. On cumulateive 9-month basis, revenue surged 27.1% to RM424.2m, mainly coming from property development segment. In tandem with this, 9MFY17 PBT rose 25.4% yoy to RM83.2m. However, PBT margin contracted marginally (0.3p.p.) on gradual increase in steel and steel related materials.

Vibrant activity in the construction space

We make no changes to our earnings forecasts. We believe activities in the sector would remain vibrant in the near to medium term underpinned by various high-profile projects from infrastructure and property development sectors. Collectively, combined GDV for these sectors stands at more than RM400bn spanning over the next 5-10 years.

Maintain BUY with TP of RM2.90

We reiterate our BUY call and maintain our TP of RM2.90 after applying 14.5x PE multiple to our FY18 EPS – a 10% premium to the sector. We believe this is fair given its dominant market position ahead of the sector’s vibrant outlook.

Source: BIMB Securities Research - 29 May 2017