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Friday, February 26, 2016

More upside for Econpile, says AmInvestment

KUALA LUMPUR: AmInvestment is retaining its Buy call on Econpile Holdings Bhd with a higher fair value of RM1.56 a share, pegged at 14 times FY16F price-to-earnings.

The research house said on Thursday the construction company reported a strong 54% earnings growth to RM31mil in the first half despite the flattish revenue growth.

“The strong performance can be attributed to higher progress billings from its property-related jobs which yield better margins (vis-à-vis that of KVMRT1 job completed last year), improved efficiency, lower material costs as well as higher utilisation of machines,” it said.

AmInvestment said Econpile’s 1H earnings had slightly exceeded expectations – making up 55% and 57% of its and consensus estimates.

Net margin for the 1H period had improved by 5.1 percentage points to 14.7% from 9.6% a year earlier.

“Its outstanding order book of RM606mil (as at-end Dec) will continue to support earnings until FY17F.

“FY16 year-to-date, it had secured RM285mil worth of jobs and making up 89% of our replenishment expectations of RM320mil (FY15: RM490mil). We think the target is achievable given its tender book of RM1bil.

“Some of the tenders Econpile is eyeing include KVMRT2 and highways such as DUKE and DASH.

“Notably, the group is expecting better margins for KVMRT2 (vis-à-vis those for KVMRT1) due to better management of wastage and costs. Overall, management expects margin to be sustainable due to the specialised nature of its work and as the outstanding jobs reach their advanced billing milestones,” it said.

AmInvestment tweaked its numbers to reflect the outstanding billings and net margin of 14% for FY16F (vs. 11% earlier). As a result, its FY16F earnings were raised by 4%.

“All in, Econpile continues to deliver both earnings and job wins. We like Econpile for its strong track record as a leading piling specialist, continued improvement in margins and sustainable contract flows on healthy demand. It is currently trading at 9 times FY16F PE,” it said.

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