AmWatch - Econpile Holdings : RM129mil job win boosts order book BUY, 22 Jan 2015

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Econpile Holdings :  RM129mil job win boosts order book              BUY

We maintain BUY on Econpile Holdings Bhd with a higher fair value of RM1.40/share (vs. RM1.28/share previously), pegged to 15x FY15F PE. Econpile announced yesterday that its wholly-owned subsidiary has secured a RM129mil piling job from Damai City Sdn Bhd. The job comprises bored piling, earthworks, foundation and substructure works of a mixed development project at Jalan Conlay, Kuala Lumpur. The duration of the job is 23 months and is expected to complete in Dec 2016.

This is the sixth (and largest in terms of contract size) major job that the group has secured since its listing last June. This latest win has boosted its new order win for YTD FY15F to RM330mil, which exceeded our previous assumption of RM320mil. We have thus increased our new order win assumption to RM400mil (FY14: RM522.6mil). We think that this achievable as demand for piling jobs remain robust with only a few key piling specialists in the market.

As such, we are now forecasting a revenue and net profit growth of 16.5% and 60% for FY15F (vs. 9% and 47% earlier) on the back of increased jobs. Our assumed net margin expansion for FY15F (+2.8ppts to 10.2%) remains intact as the group continues to secure more property-related jobs that yield better margins. Notably, its KVMRT1 jobs (which yield lower margins) will be completed by Chinese New Year while progress billings from its new jobs have yet to kick in as they are in still in the initial stages. Already, Econpile’s net margin has improved 2.5ppts in 1QFY15.

Maintain BUY. We continue to see Econpile as a strong beneficiary of rising job flow, with a strong execution and concerted efforts to improve margin. Sustainable order book replenishment will continue to boost sentiments while valuations remain undemanding at 9.6x PE currently.

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