KUCHING: AmInvestment Bank Bhd’s research arm (AmInvestment Research) remain upbeat on Econpile Holdings Bhd’s (Econpile) prospects on the back of continued strong demand for piling jobs in the industry.
The research house noted via its research report that for FY16 forecast year to date (YTD), the group has secured RM447 million worth of new jobs. Just two weeks earlier, it had won a RM54.5 million contract to do substructure works for a commercial development in Shah Alam.
“As we expect more jobs to flow through in 4Q16, we have increased our target order book for FY16F to RM500 million from RM400 million earlier. Nevertheless, we only expect these contracts to contribute strongly to the group’s bottomline in FY17F onwards, due to slower progress billings in the early stage.
“Thus, we expect the new jobs to have minimal impact on FY16F earnings,” said AmInvestment Research.
As for FY17F, the research house analysts have a target order book replenishment of RM450 million.
“Due to the mix of property and infrastructure jobs following the award of EKVE, we have scaled down our net margin expectations to 13 per cent for FY17F. Nevertheless, we still expect a nine per cent earnings growth in FY17F on the back of progressive billings from its outstanding order book.
“We believe replenishment news flow will remain strong in FY17F as a number of its current jobs will be completed in mid-2016, thus freeing up 20 per cent of its capacity.
“This puts the company in a good position to bid for more contracts. Prospective contracts include those for KVMRT2, highways and property development projects,” it added.
As for raw material prices, the research house understands that the increase in steel prices is mitigated by lower cement prices.
“Thus, we expect margins to remain stable.”
Currently, the group has an outstanding order book of circa RM682 million. This will keep the group busy until February 2018.
“All in, we continue to like Econpile for its strong track record as a leading piling specialist, continued contract wins on resilient demand, and stable margins.”