• Econpile posted a decent 2QFY18 results as net earnings grew 6.4% yoy and 7.3% qoq to RM22.7m – another record quarter.

• This led to 1HFY18 net earnings to grow 16.2% to RM44m albeit it only made up 40% of our FY18 estimates.

• Nevertheless, EBITDA margin expanded to 22.7% (+1.5ppts qoq) signaling margin recovery but contracted 0.8ppts yoy amidst stable concrete price and steel price easing

• We expect more job wins for the rest of FY18 from the infrastructure segment. As at 1HFY18, its order book stands at RM1.4bn providing earnings visibility over the next 3 years.

• Maintain HOLD with a higher TP of RM1.27 (from RM1.16) as we rollover our valuation to FY19. We peg 14.2x FY19 PE – 10% premium to the piling sub-sector given its solid fundamentals. Accumulate on dips.

Decent result with another quarterly record

Econpile posted a decent performance as 2QFY18 net earnings grew 6.4% yoy and 7.3% qoq to RM22.7m. This is one of its record quarters thus far. Overall, 1HFY18 earnings grew by a strong 16.2% to RM44m. Despite the encouraging performance, 1HFY18 earnings made up only 40% of our FY18 estimates. Property development project revenues are still the main contributor at 79% of total sales.

EBITDA margin recovery

EBITDA margin improved 1.5ppts qoq to 22.7%, We believe the recovery was mainly on the back of stable concrete price and steel prices easing, compounding the benefits of strengthening ringgit.

Strong orderbook with high replenish rate

Econpile continues to secure new orderbooks which amounts to RM441.9m in 1HFY18 thus far – or 59% of our RM750m orderbook replenishment assumption. The most recent job win was valued at RM119.1m for the construction TNB’s new headquarters. This brings current outstanding orderbook to RM1.4bn which provides earnings visibility for the next three years. We expect more job will be secured amidst on-going major infrastructure projects and additional capacity from 5 project completions during the quarter.

Maintain HOLD with revised TP of RM1.27

We raise our TP to RM1.27 as we rollover our valuation to FY19, pegging 14.2x FY19 PE. This is a 10% above the piling subsector, justified by its solid fundamental. Econpile remains our favourite, accumulate on dips.

Source: BIMB Securities Research - 27 Feb 2018