AmWatch - Econpile Holdings : Another 1.3ppt net margin expansion in 2Q BUY, 13 Feb 2015

STOCK FOCUS OF THE DAY

Econpile Holdings : Another 1.3ppt net margin expansion in 2Q  BUY

We maintain BUY on Econpile Holdings Bhd with an unchanged fair value of RM1.40/share, pegged to 15x FY15F PE. The group reported net earnings of RM10.6mil for 2QFY15F on the back of RM104.7mil in revenue.

Its 1H earnings of RM20.2mil are largely in line – making up 40% and 46% of our and consensus full-year forecasts, respectively. We maintain our numbers as we expect stronger contributions in the 2H. Sequentially, 2Q topline were flattish due to lower recognition from jobs in hand. This is within expectations as 2Q is traditionally the slowest quarter due to the rainy season. More importantly, net earnings expanded sequentially by 12% on the back of continued margin improvements.

Notably, Econpile’s net margins expanded to 10.2% (from 8.9% in 1QFY15 and 6.4% in 4QFY14) on the back of higher recognition of property-related jobs that yielded better margins. Management noted that the KVMRT jobs will be completed by Chinese New Year. Thus, we expect net margins moving forward to fully reflect those of property-related jobs. Given the latest results, our investment thesis premised on margin expansion remains on track. We are forecasting a net margin of 10.2% for FY15F (+2.8ppts from 7.4% in FY14). This is on the back of a strong outstanding order book of RM450mil (as at end-Dec). YTD FY15F, the group has secured RM330mil worth of new jobs, which are all property-related ones.

Our new order win assumption of RM400mil for FY15F is intact given its tender book of ~RM1bil and strong demand for piling jobs in the market. Econpile is one of the few piling specialists in the market with a 13% share. Its manpower and fleet size are among the largest. Maintain BUY. Econpile is a strong beneficiary of rising job flows, with a strong execution and concerted efforts to improve margins.

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Others :

Parkson Holdings : Active share buybacks continues        BUY

YTL Power : No surprises at the interim  HOLD

Press Metal : FY14: Strong contributions from two plants              HOLD

AMMB Holdings : 3QFY15 in line with expectations           NON-RATED

EconWatch: GDP grows on private sector spending in 4Q14

Economic Upadate : Current account moderates to RM6.1bil in 4Q14

QUICK TAKES

Eastern & Oriental : The Tamarind at STP1 to be unveiled on 21 Feb         BUY

CIMB Group : CIMB Niaga faring better than expected in 4Q        BUY

Malayan Banking : Asset quality improvement for Indonesian unit in 4Q                HOLD

Genting Singapore : Breaks ground on “Resorts World Jeju”        HOLD

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