Econpile Holdings Bhd
(Mar 27, RM0.995)
Maintain buy with a higher target price (TP) of RM1.24. Econpile Holdings Bhd has secured a contract from Flora Development Sdn Bhd to undertake piling and related works for the IOI Rio City mixed development in Puchong, Selangor worth around RM54.5 million. 

We are pleasantly surprised this earlier-than-expected contract. With this contract, Econpile’s financial year ending June 30, 2015 (FY15) job replenishment has exceeded our assumption by 11% and also the management’s guidance by 29.5%. 

After updating our earnings projection with assumption of RM400 million jobs win in FY15, our FY16 forecast was adjusted higher by 1.6% with no significant changes to our FY15 figure. 

As such, we derive a new TP for Econpile based on 13 times price-to-earnings ratio to its FY16 earnings per share. 

Assuming the pre-tax margin is around 10%, the project is expected to contribute a total of RM5.4 million to the group’s pre-tax profit to be spread over FY15 to FY17.

Including this project, the group has successfully secured a total of RM388.6 million worth of projects this financial year, hence pushing its outstanding order book to about RM500 million which should keep it busy till 2016. — BIMB Securities Research, March 27

This article first appeared in The Edge Financial Daily, on March 30, 2015.