• Econpile posted a strong FY17 net profit which grew 19.6% yoy to RM80.8m. However, the results fell short of our forecasts but was within consensus at 91% and 98%, respectively.

• FY17 revenue surged 25.9% yoy to RM581.9m, mainly due to contribution from the piling and foundation works which derives revenues mostly from property development projects.

• Fairly valued. We downgrade Econpile to HOLD while keeping our TP unchanged at RM2.90. While the stock currently trades at its peak PE of 20x, we like Econpile for its earnings visibility and strong orderbook replenishment. Accumulate on dips.

Yoy surge driven by strong orderbook

4QFY17 earnings grew 12.2% yoy to RM20.9m on the back of its strong orderbook replenishment rate in the last 12 months which led to revenue growth of 22.8% yoy. Meanwhile, FY17 earnings grew 19.6% yoy to RM80.8m, marking another record year for the company. However, it fell short of our earnings estimate at only 91% (possibly due to seasonal impact) but was broadly in-line with consensus at 98%. At the end of FY17, Econpile’s orderbook stood at RM1.2bn and provides earnings for the next 2 years.

Qoq impacted by seasonality

Econpile’s 4QFY17 earnings fell 5.7% qoq. Management attributed the weakness to the timing of billings in view of the shorter working month as a result of the Hari Raya festive season at the end of the quarter. Furthermore, management also noted that earnings were impacted by the increase in raw material costs during the period.

Vibrant activity in the construction space

We make no changes to our earnings forecasts pending analyst briefing (next Monday). We believe activities in the sector remains vibrant arising from various projects in the infrastructure and property development sectors. Collectively, the combined GDV for these sectors stands at more than RM400bn with development period spanning over the next 5-10 years.

Fairly valued: downgrade to HOLD with unchanged TP of RM2.90

Econpile’s share price has surged by more than 60% ytd (from RM1.83 at the start of 2017). While we believe the stock is fairly valued at this juncture, we like it for its sound fundamental, strong orderbook and orderbook replenishment rate. As such, reduce to HOLD and we recommend revisiting the stock on dips.

Source: BIMB Securities Research - 24 Aug 2017