PETALING JAYA: Econpile Holdings Bhd
has the potential to transform its strong new order wins into higher earnings, says CGS International (CGSI) Research.
The research house made a site visit to Econpile’s largest project clinched year-to-date at Arte Star in Sungai Besi, Kuala Lumpur.
The project is a RM101mil contract to undertake sub-structure works for three blocks of small office-home office (SoHo), comprising two blocks of 50-storey SoHo and a block of 51-storey SoHo, together with podium and basement carpark floors.
Section one (out of three) is almost completed and ahead of schedule.
The project is divided into three sections based on the site area.
Econpile said “new wins could also be derived from private sector residential projects in Cambodia and infrastructure projects in Singapore such as Changi Airport terminal five”.
“The tenders for Changi terminal five have opened, with total construction cost estimated at S$10bil and a need for around 13,000 piles.”
Econpile’s total contracts for the first six months of its financial year 2024 (FY24) totalled to RM392mil. The group expects FY24 wins of RM500mil.
This is compared with CGSI Research’s forecast of RM400mil. For financial years 2025 and 2026, its new order win forecasts are RM650mil to RM700mil respectively.
It reiterated its “add” call on the stock with a target price of 61 sen.
“Further share price re-rating will be contingent on converting strong new order wins into higher margin earnings and successful collection of receivables.
“Although Econpile has been impressive in its ability to clinch new contracts, it sensed that investors are sceptical about its ability to convert new jobs into higher margin earnings,” it said.
This is due to the group posting net losses in nine of its last 10 quarters.
The research house is optimistic that the piling and foundation specialist group would return to the black by the second half of FY24.
Most of its low-margin legacy projects had already been depleted. Econpile also wrote down margins for some projects in the second quarter of the financial year ending June 30 2024.
