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Tuesday, August 23, 2016

Will Econpile Continues Its Share Price Upward Momentum?

Holistic View of Econpile with Fundamental Analysis & iVolume Spread Analysis (iVSAChart)
Author: Joe Cool | Publish date: Tue, 23 Aug 2016, 02:06 PM

Will Econpile Continues Its Share Price Upward Momentum?

Founded by Group Managing Director Mr The Cheng Eng in 1987, Econpile is a piling and foundation specialist in Malaysia providing piling solutions and foundation works, which includes earth retaining systems, earthworks, substructure and basement construction works. Econpile has a full range of piling (bored piling, driven piles and jack-in piles) and foundation works. Econpile serves the property development and infrastructure sectors, having been involved in the construction of bridges, elevated highways, electrified-double tracking projects and power plants.

To date, Econpile has successfully undertaken numerous piling and foundation projects nationwide, including the Klang Valley, Penang, Johor, Pahang, Sabah and Sarawak. Econpile holds a Grade 7 License from the Construction Industry Development Board of Malaysia, which allows the Group to tender for projects of unlimited values in the categories of building, and infrastructure works.

Based on full Financial Year (FY) 2015 results, Econpile achieved RM 428 million turnover, which is considered to be mid size enterprise based on turnover value. Other aspects of the company’s latest financial results are illustrated in the table below.

Econpile (5253.KL)
FY 2015
TTM (Mar 2016)
Revenue (RM’000)
428,980
437,533
Net Earnings (RM’000)
46,612
62,902
Net Profit Margin (%)
10.87
14.38
Return of Equity (%)
23.31
25.57
Total Debt to Equity Ratio
0.12
0.11
Current Ratio
2.24
2.44
Cash Ratio
0.15
0.18
Dividend Yield (%)
3.95
2.30
Earnings Per Share (Sen)
36.42
11.76
PE Ratio
17.45
12.93


Till date, Econpile has only two full financial year (FY) results hence we shall analyse based on FY2014 to FY2015. Econpile’s revenue has increased 2.45% from RM 418 million in FY2014 to RM 428 million in FY2015. Net profit wise, Econpile has also increased by a great 50% from RM 31 million in FY2014 to RM 46 million in FY2015. This is contributed by much lower cost of revenue which reflects well on the company’s ability in cost control and better resource utilisation.

Net profit margin wise, Econpile scores a 10.87%, which is consider average for a construction company, probably due to the scale of the company have not reach a scale where resource utilisation is high enough for a good margin. Return of equity (ROE) at 23.31% is a good score which shows that the company’s net profit margin still has much room to improve.

On company’s debt, Econpile has low total debt to equity ratio at 0.116, meaning 11.6% of its company value are from long and short term borrowings. The company’s current ratio has a healthy value at 2.24 however its cash ratio is very low at 0.15, this may be due to the long debtor’s turnover issue that most construction company faces.

In terms of dividend, Econpile pays a relatively high 3.95% dividend yield. It is also a great sign that Econpile’s dividend payout ratio is low at 0.29, meaning that the company still retains majority of its earnings for capital expansion plus reducing long term debt.

In conclusion, Econpile is a mid-size enterprise with good fundamentals for having low debt to equity ratio. However, although the company’s net profit grow figures are healthy, the revenue growth of the company remains a concern as it is on an average year to year growth of only 2% which is either below or on par with the countries inflation rate.

Looking at the Trailing Twelve Months (TTM) financial figures (based on three released quarterly results till Mar 2016), both revenue and net profit of Econpile are projected to increase, with net profit projected to increase by 35% while projected revenue increase merely 2%. Although mathematically the increase of profit will bring down its PE ratio, making it attractive for investors thus induce a great short term growth, the slow increase in revenue will be the barrier for the company’s share price to continue its upward momentum in long term.

Next quarterly results announcement should be on the month of Aug 2016 for Q4 results.



iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Econpile



Based on Econpile’s 6-month weekly iVSAChart, the stock was building a nice base of support around RM1.30 since mid-April 2016 and begin raising since early July 2016 to hit a new intraday high at RM1.61. Since hitting the new high, the stock has retreated to RM1.45 in the last 2 weeks.

Do look out for Sign Of Strengths (green arrow) before accumulating as the downtrend or sideway movements may likely to continue.



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This article only serves as reference information and does not constitute a buy or sell call. Conduct your own research and assessment before deciding to buy or sell any stock. If you decide to buy or sell any stock, you are responsible for your own decision and associated risks.

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