KUALA LUMPUR (March 27): Shares in Econpile Holdings Bhd rose 2.10% in active trade this morning following a positive technical outlook on the stock.

At 9.16am, Econpile rose 1 sen to 48.5 sen with 4.47 million shares traded.

Hong Leong IB Research (HLIB) said that the 54% meltdown in Econpile’s share prices since GE14 has grossly priced in the headwinds currently faced by the construction sector, in wake of a major cutback in infrastructure spending and the reduction in overall margins as the government observes higher standards of transparency and accountability in public procurement.

In a technical tracker today, the research house nevertheless said it remains positive on Econpile due to: (1) high barrier of entry given the considerable costs of equipment and machinery, as well as the limited availability of experienced operators (2) lower payment risk compared to industry, (3) potential revival of certain mega projects, albeit on a smaller scale (4) sturdy balance sheet (0.04x net gearing end Dec) provides the Group greater flexibility for project execution/expansion and sustainable dividend payment, and (5) attractive risk-reward profile at 9.8x FY20E P/E (30% lower compared to its peers), with strong outstanding order book of circa RM1 billion to provide earnings visibility over the next two years and a decent 3.1% yield. 

HLIB said in the short term, Econpile may trap in consolidation mode as share prices continue to hover below the multiple major SMAs and flattish daily indicators.

“However, a successful breakout above the downtrend line near 50 sen will lift prices higher towards 57 sen (Feb 25 high) and our LT objective at 60 sen (38.2% FR).

“On the contrary, near term supports are 44 sen (March 18) and 42 sen (daily Lower BB). Cut loss at 41 sen,” it said.