KUALA LUMPUR: AmInvestment Research has maintained its hold call on Econpile Holdings Bhd
, as well as its forecasts and fair value of of 86 sen based on a 14x FD CY18E earnings per share of 6.15 sen.
According to the the research firm, Econpile has secured a RM25.9mil contract for site preparation, earthworks, piling and basement works from Putra Perdana Construction Sdn Bhd for a hospital
redevelopment project in Kota Damansara, Selangor.
Incluiding the contract, Econpile's has secured RM467.8mil in contracts year-to-date, and its outstanding order book stands at RM1.33bil.
"We are keeping our forecasts which assume Econpile will secure RM600mil worth of new jobs annually in FY18-20F. Recall, FY17 was a bumper year for Econpile with total job wins of RM1.19bil, compared with RM662mil in FY16."
AmInvestment Research noted that Econpile's blended margins are on a declining trend due to higher steel bar prices, higher depreciation due to more extensive capex in recent years and the shift in its job mix towards the low-margin infrastructure piling jobs.
"Econpile mentioned the strategy of growing the top line and boosting efficiency (via good management of human resources and optimal deployment of machinery – state-of-the-art machines for high-value jobs and fully- depreciated/old machines for smaller and low-value jobs) to counter the margin pressure."
The research firm likes Econpile for its strong earnings visibility backed by the prospects of the piling/foundation segment and sizeable order backlog which will keep it busy for the next 12 to 24 months.
It added that the entry barrier to the sector is high given the high costs of the equipment and machinery as well as the limited availability of experienced operators.
"However, we believe the current share price has very much reflected Econpile’s fundamentals," it said.
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