Quick take: Econpile actively traded after contract win

KUALA LUMPUR: Econpile Holdings Bhd’s share price rose as much as 5.20% this morning after the company secured a RM209mil contract.

The piling and foundation specialist gained two sen, or 4.17% to 50 sen with 10.59 million shares traded.

Econpile has bagged a RM209.3 million contract to undertake basement and substructure works for Phase 2 of the Pavilion Damansara Heights mixed development on Jalan Damanlela.

This new contract brings Econpile’s total new wins to RM506.7mil in the current financial year to date, which is higher than the RM473.4mil recorded in the financial year ended June 30, 2018 (FY18).

AmInvestment Research has maintained its “underweight” call, forecasts and fair value of 35 sen based on 8x FD CY19F EPS of 4.4 sen, in line with its benchmark forward P/E of 8x for small-cap construction stocks.

“The latest job has boosted its YTD (FY June) job wins to RM506.7mil and helped to sustain its outstanding order book at RM1.1bil.

“We are keeping our forecasts that assume Econpile securing RM500mil new jobs annually in FY19-21F,” it said.

The research house said the current slowdown in the local construction industry sector was no ordinary sector cyclical downturn, but a secular change to the sector’s fundamentals, triggered by a major cutback in public infrastructure spending over the medium term as the government adheres to fiscal prudence

It also noted that the permanent reduction in overall margins for players in the absence of high-margin directly-negotiated government jobs, as the government observes higher standards of transparency and accountability in public procurement.

“We are also mindful of the acute oversupply situation in the high-rise residential, retail mall and office segments, which translates to weak prospects in property-related job wins for piling contractors like Econpile,” AmInvestment said, adding that its valuations were unattractive at 11–13x forward earnings on muted earnings growth prospects.

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