KUALA LUMPUR: AmResearch maintains its Buy call on Econpile Holdings Bhd
with an unchanged target price of RM1.50 per share – pegged at 14x financial year ending June 30, 2016 PE.
The research house said in a note on Wednesday that continuous demand for piling jobs should sustain momentum given Econpile’s expertise and leading position in the industry.
Econpile announced on Monday that it has secured a RM120.5mil piling and basement works contract for the Menara Felcra mixed development on Jalan Semarak, Kuala Lumpur.
The contract was awarded by WZR Property Sdn Bhd to Econpile’s unit, Econpile (M) Bhd and involves the provision of bored piling and diaphragm wall works as well as the construction of four basement levels for the project.
The duration of the contract is 18 months and it is slated to be completed by May 2017. The contract will contribute to the group’s earnings in 2016 and 2017.
The contract is part of the development of the new HQ for Felcra Bhd, comprising a 35-storey office tower, a 43-storey residential tower, as well as a six-storey commercial and retail block.
“This is the first major contract announced by Econpile for 2016. It is within our new order book replenishment of RM320mil for 2016 (2015: RM490mil),” said AmResearch.
This brings its outstanding order book to RM590mil. The research house expects more awards to flow through given Econpile’s tender book of ~RM1bil.
Demand for piling is expected to remain resilient for upcoming property jobs as well as infrastructure works. Econpile stands a good chance to secure piling jobs for MRT2 and LRT3, given its experience in the MRT project.
The stock is currently trading at 10x 2016 PE. Its first quarter of 2016 results are slated for release on Nov 27 Nov. Margins may be sustained at the current levels, or even surprise on the upside due to better efficiency and lower raw material prices, said AmResearch.
Margins had improved from 5% to 11% from 2011 to 2015.
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