• Econpile posted a good set of results as 1QFY18 net earnings grew 29% yoy and 1.6% qoq to RM21.2m to be broadly in-line with our FY18 estimates at 19%.

• Despite the encouraging performance, margin pressures were notable as EBITDA margin eased to 21.3%, down 2.5ppts yoy and 1.2ppts qoq.

• An interim DPS of 1.5sen was declared, matching that declared in 1QFY17.

• While we believe Econpile is one of the best proxies to the Construction sector, valuation has run up strongly with the stock now trading at 14.4x FY18 PE. Maintain HOLD.

Another strong showing

Econpile posted another solid performance with 1QFY18 net profit rising 28.9% yoy and 1.6% qoq to RM21.2m. This also marks one of its strongest quarterly earnings since 2QFY17. The strong growth was on significant progress billings from sizeable projects such as the Maju KL, Oxley Towers KLCC and Pavilion Damansara Heights. This made up 19% of our FY18E estimates and 26% of consensus; we deem this as being broadly in-line as we expect more job recognitions in the coming quarters.

Revenue still predominantly property development

Management noted that revenues were predominantly derived from property development projects which made up 83% of total revenue with the rest from infrastructure projects. The 1QFY18 revenue is also the largest quarterly amount recognized.

Orderbook remains healthy

We make no changes to our forecasts as we expect more job recognitions in coming months. Its orderbook remains robust at RM1.2bn, providing visibility in the next 2-3 years. We note that margin pressures has set in as 1QFY18 EBITDA margin fell 2.5ppts yoy and 1.2ppts qoq to 21.3% amidst elevated steel prices. That said, Econpile has already secured RM290m worth of orderbook in 1HFY18; most recent was RM208.7m LRT 3 project. This already accounts for 39% of our assumed job win of RM750m in FY18.

Maintain HOLD with TP of RM2.90

Econpile’s share price has surged close to 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. Maintain HOLD and revisit the stock on dips.

Source: BIMB Securities Research - 23 Nov 2017