We maintain HOLD on Econpile Holdings (Econpile) with a higher fair value (FV) ofRM0.39/share (from RM0.28/share previously) based on 1.4x FY24F book value – at parity to its 5-year mean. There are no FV adjustments for ESG based on our 3-star rating.
We deem Econpile’s 1HFY24 results as below expectations with a deteriorating core net loss (CNL) of RM14.9mil (+3.3x YoY) compared to our earlier FY24F net profit of RM8.3mil and consensus’ RM7.8mil. We cut our FY24F-25F earnings by 10% to account for the losses.
On QoQ basis, 2QFY24 CNL widened 3.3x to RM11.5mil from RM3.4mil in 1QFY24 as revenue decreased 8.5% to RM110mil. The bottomline was impacted by legacy projects as costs overruns greatly impacted margins. This was exacerbated by finance costs increasing by 14% QoQ as net gearing increased to 23% from 17% in end-FY23.
Econpile’s order book decreased by 27% QoQ to RM304mil as at end-December 2023 due to lower new contracts secured against higher progress billings.
Currently, there are 19 on-going projects at various stages of completion. Notable projects are (1) Three- Block SOHO @ KL (RM101mil); (2) The Park 3 @ Bukit Jalil (RM43mil); and (3) Pinnacle @ Subang Jaya SS16 (RM35mil).
Future prospects include civil infrastructural projects such as MRT 3 and Penang LRT. Econpile is also well positioned in Cambodia to win jobs with the expectation of higher margins compared to local jobs.
Challenges include (i) weaker-than-expected recovery of job flows; (ii) eroding profit margins as building material costs rise; and (iii) shelving of mega projects.
The stock currently trades at a fair FY24F P/BV of 1.3x, near its 5-year mean of 1.4x.
New IPO: Building management systems (BMS), solar thermal systems and energy-saving services provider, Solar District Cooling Bhd aims to list on the Ace Market!
MQ Trader 248 views | 1 d ago
0:17
New IPO: The onshore and offshore support services provider for the O&G industry, Steel Hawk Bhd aims to list on the Ace Market!
MQ Trader 11332 views | 9 d ago
0:17
New IPO: The largest mini-market player and a leading groceries retailer in Malaysia, 99 Speed Mart Retail Holdings Bhd aims to list on the Main Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....