Econpile nabs RM68.8 mln piling job in Putrajaya

KUALA LUMPUR: Econpile Holdings Bhd (Econpile) secured a RM68.8 million piling, pilecap and basement works award for a mixed high-rise development named Terra in Precinct 8, Putrajaya.

According to AmInvestment Bank Bhd (AmInvestment Bank) in a company report, the win was a positive deviation as it brought the group’s year-to-date job wins to RM575.5 million, above the banks forecast of RM500 million worth of new jobs in financial year 2019 (FY19).

“Our forecasts now assume Econpile to secure RM600 million worth of new jobs in FY19 and for FY20-21 forecasts, we are keeping our assumption for job wins at RM500 million annually,” specified the bank.

However, despite the latest job award, the group’s outstanding order book has slipped to RM950 million from the last reported number of RM1.1 billion.

“We believe this is largely due to work progress on ongoing projects,” said the bank.

Additionally, AmInvestment Bank also guided that they would be raising their FY19-21 net profit forecast by 3, 6 and 7 per cent respectively with a maintained ‘Underweight’ call and an increased fair value (FV) of RM0.27 from RM0.26.

“Our new FV is based on 8-fold forward calendar year 2019 forecasted earnings per share of 3.35 sen, in line with our benchmark forward price earnings ratio of 8-fold for smallcap construction stocks,” detailed the bank.

According to the bank, the reasoning for maintaining their underweight call on the construction stock is due to the current slowdown in the local construction industry sector which they believe is no ordinary sector cyclical downturn, but rather a secular change to the sector’s fundamentals.

AmInvestment Bank believes thatthesecularchangeistriggered by the major cutback in public infrastructure spending over the medium-term as government adheres to fiscal prudence, and the permanent reduction in overall margins for players in the absence of high margin directly negotiated government jobs as the new government now observes higher standards of transparency and accountability in public procurement.

“We are also mindful of the acute oversupply situation in the high-rise residential, retail mall and office segments, which translates to weak prospects in property-related job wins for piling contractors like Econpile.

“Its valuations are unattractive at 11 to 22 times forward earnings on muted earnings growth prospects,” said the bank.