We maintain our forecasts, HOLD call and FV of RM2.13, following an analysts briefing today. Our FV is based on 13x FY18F EPS of 16.4sen, at a slight premium to our 1-year forward target PE of 10-12x for small-cap construction stocks to reflect a relativel

We maintain our forecasts, HOLD call and FV of RM2.13, following an analysts briefing today. Our FV is based on 13x FY18F EPS of 16.4sen, at a slight premium to our 1-year forward target PE of 10-12x for small-cap construction stocks to reflect a relatively less competitive piling segment vis-à-vis general contracting. YTD (FY), Econpile has secured new jobs worth a total of RM1.05bil, underpinned largely by the RM570.4mil foundation and basement structure works for Pavilion Damansara Heights – the biggest contract it has secured ever. It hopes to secure another RM200mil worth of new jobs before the FY is out, comprising mainly smaller piling/foundation work packages and potentially an MRT station package. Hence, we are keeping our FY17F assumption for job wins of RM1.2bil. From FY18F onwards, Econpile believes its job wins should normalise to RM600-700mil annually, which is consistent with our assumption of RM600mil. Recall, Econpile secured RM627mil new jobs in FY16.

Econpile is confident about sustaining its overall margins (>20% at the gross level). This will be achieved: (1) via the provision of alternative design (that will result in cost savings) to the Pavilion Damansara Heights project; (2) by virtue of it now having a lower number of projects to manage at any one point as it moves towards larger projects; and (3) a more stable input cost with steel bar prices stabilising at the current level of about RM2,200/tonne while cement prices remain depressed. Econpile said that the piling/foundation package for Bukit Bintang City Centre (BBCC) it was eyeing previously is "no longer a key focus". We understand that the main contractor who has an existing tie-up with Econpile in its bid for the project, has not emerged the front-runner for the project. We like Econpile for its strong earnings visibility backed by the bright prospects of the piling/foundation segment coupled with its sizeable order backlog of RM1.4bil (Exhibit 2) which will keep it busy for the next 12-24 months. However, we believe the current share price has very much reflected Econpile’s fundamentals.