• 4QFY18 earnings declined 6.7% yoy and 18.0% qoq to RM19.5m due to low-margin projects and shorter working days. However, its FY18 earnings were broadly inline with our estimate.

• The recent two jobs secured in August 2018 (RM64m) added to total YTD orderbook replenishment of RM186m, which makes up 46.5% of our assumption for FY19F.

• In recent meeting, management noted that the setbacks on mega infrastructure projects have dampened the confidence of property developers. Hence, we remain uninspired on its outlook.

• Downgrade to HOLD following its recent share price recovery with an unchanged TP of RM0.80. While fundamentals remain solid, the sector lacks near-term catalyst to drive up share price.

Broadly inline with our estimate

Econpile’s 4QFY18 earnings declined 6.7% yoy to RM19.5m on higher portion of infrastructure projects recognised, implying a lower margin realised. On qoq, earnings were softer mainly on lower progress billing given the shorter working month, i.e Hari Raya holidays and additional public holidays post-GE14. Nevertheless, FY18 earnings grew 7.8% to RM87.1m, broadly inline with our estimate of RM81.5m.

Two jobs secured within August 2018

The company recently secured two jobs amounting RM64m in August 2018. This brings YTD new orderbook replenishment to RM186m for FY19F, which makes up 46.5% on our assumption of RM400m. Despite a good replenishment rate within two months of FY19F, we maintain our assumption in view of lower job secured expected for the rest of the year.

Uninspiring outlook for infrastructure and property sectors

In our recent management meeting, setbacks on mega infrastructure projects have dampened the confidence of property developers. We were made to understand that some developers have either deferred contract awards or requested retendering exercise due to design changes. Hence, we remain cautious on its outlook given the lack of any meaningful catalysts, in our opinion.

Downgrade to HOLD with unchanged TP of RM0.80

We downgrade our call to HOLD with unchanged TP of RM0.80 after its share price has recovered following the post-GE14 sector sell down. While fundamentals are solid, backed by its RM1.3bn order book, the stock and sector overall lack near-term catalyst.

Source: BIMB Securities Research - 30 Aug 2018