Econpile up 5.2% after bagging RM209.3m job

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KUALA LUMPUR (Feb 13): Shares of piling and foundation specialist Econpile Holdings Bhd were up 5.2% earlier this morning after the group yesterday announced it had bagged a RM209.3 million contract for Phase 2 of the Pavilion Damansara Heights mixed development.

At 10.52am, the stock pared some of its gains and was up 1.5 sen or 3.1% at 49.5 sen, with 13.85 million shares traded for a market capitalisation of RM642 million. Over the past year, Econpile shares slid some 54.9% from RM1.06.

In a filing to Bursa Malaysia yesterday, the firm said the work involved undertaking basement and substructure works for the project.

This new contract brings Econpile's total new wins to RM506.7 million in the current financial year to date, which is higher than the RM473.4 million recorded in the financial year ended June 30, 2018 (FY18).

Its orderbook currently stands at RM1.1 billion, which will provide earnings visibility till FY21.

Despite the new contract, AmInvestment Bank analyst Joshua Ng still maintained an underweight call on Econpile with a fair value of 35 sen.

"We hold the view that the current slowdown in the local construction industry sector is no ordinary sector cyclical downturn, but a secular change to the sector's fundamentals," said Ng in a note today.

He explained that the current slowdown is triggered by a major cutback in public infrastructure spending over the medium term as the 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 government observes higher standards of transparency and accountability in public procurement.

Ng also wrote that the acute oversupply situation in the high-rise residential, retail mall and office segments translates to weak prospects in property-related job wins for piling contractors like Econpile.

He noted that the group's valuations are unattractive at 11 times to 13 times forward earnings on muted earnings growth prospects.