• Econpile secured basement and substructure works worth RM209m for Pavilion Damansara Heights Phase 2 as continuation works from previous contracts secured.

• This makes up RM507m contracts secured YTD, 27% ahead of our RM400m FY19 replenishment assumption. Despite that, we keep our forecast unchanged pending 2QFY19 results later this month.

• Upgrade to HOLD with an unchanged TP of RM0.50 following the 18.7% share price decline since end Nov 2018. While outstanding orderbook provide earnings visibility upto FY21, upside is limited.

A series of contracts since 2017

Econpile secured basement and substructure contract worth RM209m for Pavilion Damansara Heights Phase 2. The contract is deemed as a continuation work for contracts secured within the same development site awarded in 2017 and 2018 (Table 1).

Potential upside on the EPS estimates but….

The job win brings YTD orderbook replenishment amount to RM507m which exceeds our RM400m new job win assumption for FY19F by 27%. Based on our current net margin assumption of 8.8% and 30-50% of progress billing, the project could enhance FY19F EPS to 4.7-4.9sen or 4-9% increase. Nevertheless, we keep our forecasts unchanged for now ahead of the upcoming 2QFY19 result for better sense of its prospects.

…concern on its earnings risk

We remain concern over its earnings prospect after 1QFY19 earnings disappointment where net margin eroded to 7.5% caused by prolonged labour-intensive works arising from basement works. In addition, the margin also impacted by unfavourable project mix as a result of higher progress billings from infrastructure projects.

Upgrade to HOLD with unchanged TP of RM0.50

We upgrade to HOLD (from SELL) with unchanged TP of RM0.50 as the share price has corrected 18.7% since end Nov 2018. While Econpile boasts outstanding orderbook of RM1.1bn which provides visibility up to FY21F, we see limited catalyst to the stock in the near to medium term given the tepid outlook on mega projects.

Source: BIMB Securities Research - 13 Feb 2019