This article first appeared in The Edge Financial Daily, on March 3, 2016.

Econpile Holdings Bhd
(March 2, RM1.03)
Maintain buy with unchanged target price (TP) of RM1.62. Econpile Holdings Bhd (Econpile) reported that it had recently secured its fourth project of the year from Ahmad Zaki SB to undertake bored piling works for Packages 1 and 2 of the East Klang Valley Expressway worth about RM76.9 million. Work on the project starts this month and is due to be completed in February 2018. 

We are not surprised with the contract as we have already imputed into our financial year 2016 (FY16) order book replenishment projection of RM350 million. Hence, no change to our FY16/FY17 earnings projection. 

The group’s total order book replenishment thus far is RM313.2 million, accounting for 89.5% of our job wins assumption of RM350 million in FY16. With that, the group’s total outstanding order book in hand stands at some RM608.2 million (comprising 25 ongoing projects), and hence should be providing earnings visibility until 2017.

Assuming the project offers a pre-tax margin of 12%, the project is expected to contribute around RM7 million to the group’s net earnings, translating into about 1.3 sen per share to be spread over two years.

The group’s tender book now stands at more than RM1 billion with more infrastructure projects to come on stream, particularly MRT2, LRT3 and highways. 

Meanwhile, Econpile is also actively looking for development projects, especially in Jalan Pudu and Damansara Uptown. We maintain our TP at RM1.62 for Econpile with a “buy” rating. — BIMB Securities Research, March 2