Econpile secured bored piling contract worth RM122m for bored piling works on Pavilion Damansara Heights Phase 2. This is continuity from the contiguous bored piling contracts worth RM18m awarded in Sep 2017. The new contract awarded makes up 30% of our RM400m FY19 orderbook replenishment assumption.
The piling works is expected to complete within 13 months which would see 92% of work progress recognised in FY19. Based on 11% net margin assumption, we estimate the contract could add c.17% to our FY19F estimate of RM74m. We believe the 11% assumptions is fair as there is minimal downtime in capacity utilisation given the same job nature and within the vicinity of the existing job site.
We reckon there could be another round of award for substructure works. Recap that Phase 1 contract, worth RM570.1m, consisted of earthworks, bored piling, and substructure works. The total contract awarded for Phase 2 has so far amounted to RM140m (including the RM18m awarded in Sep 2017) for bored piling works. This could further add to our RM400m orderbook replenishment assumption for F19.
Maintain BUY with RM0.80 TP which is derived based on 14.5x PE pegged to our FY19 EPS. The multiple is the average between 2-year mean (13.4x) and +1 standard deviation (15.6x) of its forward PE based on Bloomberg estimates. We also believe that it could withstand sector headwinds owing to its sound fundamentals: i) strong orderbook of RM1.2bn which could sustain earnings for the next 2 years, ii) boasts one of the highest ROEs in the sector backed by strong asset turnover and iii) strong balance sheet with minimal net gearing of only 1.4% at end 31 Mar 2018 (3QFY18).
Source: BIMB Securities Research - 9 Jul 2018
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