"We maintain our view that the government will have very limited room for fiscal manoeuvre in 2021 given the elevated national debt, even before the pandemic.
"The government’s fiscal position has been weighed down further by the economic impact of the pandemic (including reduced tax and petroleum revenues), as well as the massive relief spending to cushion the economic impact of the pandemic," it said in a note.
It added that there is an 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 contactors like Econpile.
AmInvestment noted that Econpile does not expect a significant improvement in margins over the immediate term given the various operational restrictions under the new norm and additional costs incurred with regards to migrant worker welfare.
The research house assumes an average EBIT margin of 6% in FY21, before recovering to 10% in FY22-23 backed by the high-margin Cambodia job.
Econpile is targeting mainly small piling/substructure jobs locally and expects to be able to meet its new job target of RM500mil in FY21.
Year-to-date, the group has secured RM403mil in new jobs, including a US$85.7mil piling and substructure work subcontract for an integrated entertainment complex in Phnom Penh, Cambodia.
AmInvestment reduced its FY21-23 net profit forecasts by 42%, 2% and 1% respectively but maintained its fair value at 18 sen per share based on 8x revised fully diluted FY22 forecast earnings per share.
"Econpile’s valuations are excessive at 17–31x forward earnings on muted earnings growth prospects," it said while reiterating its "underweight" recommendation on the stock.