Econpile earnings only met 62%/71% of ours and consensus earnings 2018F despite of a record high quarterly progressed billing. Its 9M2018 EBITDA margin has contracted to 20.2% from 23.5% due to persistent margin pressures from increasing steal price. We believe steel price would remain high in future driven by stronger demand.
Its YTD new orderbook replenishment is RM453m, falling short of our RM750m assumption. With a month to go to its FYE June, we assume no new orderbook for the rest of the period. Separately for 2019F, we pared down orderbook replenishment to RM400m, from RM750m, amidst potential deferment of mega infrastructure projects ie. ECRL and HSR. As a result, we expect lower orderbook spillover into 2020F which would see earnings easing 57%.
About 68% of existing orderbook comprises of piling and substructure works for mixed development property projects ie Pavilion Damansara Heights and TNB HQ, while the rest are infrastructure projects. Its existing orderbook can sustain until 2020F.
We upgrade our call to BUY with a lower TP of RM0.80 (from RM1.27). This is arrived by applying 14.2x PE, 10% premium over subsector piling as we believe recent sell-down is overly done due to uncertainty over the sector’s outlook after the new government signalled its plan to review mega projects.
Source: BIMB Securities Research - 24 May 2018
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