Econpile Holdings Bhd
(May 20, RM1.12)
Maintain buy with a target price (TP) of RM1.27: Econpile’s results for the first nine months ended March of financial year 2015 (9MFY15) were within our but below consensus expectations, accounting for 76% of our and 65.7% of consensus full-year earnings estimates. 

Net earnings for 9MFY15 of RM32.7 million jumped by 32.6% year-to-date (YTD) from RM24.6 million in 9MFY14 on the back of a 2% growth in revenue to RM325.2 million. 

The commendable earnings can be attributed to the higher progress billings of its ongoing projects and due to improvement of margins as the Klang Valley mass rapid transit (MRT) jobs are near the completion stage. 

We are leaving our FY15 and FY16 earnings forecast unchanged with the expectation that earnings will be sustained in the fourth quarter (4Q) of FY15. 

Econpile’s 3QFY15 revenue improved by 9% to RM114.1 million thanks to the higher billings for its property development segment. In tandem with that, profit before tax (PBT) surged by 15.1% attributed to the margins improvement.

Group PBT margin improved by 2.8 percentage points to 14% YTD compared with 11% in 9MFY14 as the MRT Line 1 jobs are coming to an end. We expect margins to sustain until the end of next year before the commencement of MRT Line 2.

The group has declared a single-tier second interim dividend of 1.5 sen per share. 

With that, Econpile has declared a total of 2.5 sen dividends this financial year, translating to a yield of 2.1%.

We maintain our FY15 and FY16 earnings projections of RM43 million and RM52.2 million at a PBT margin of 12.7% and 14.1% respectively with a strong order book in hand at about RM540 million. Econpile has secured a total of RM418 million worth of projects in the current financial year. 

We envisage the group is on the right track to ride the promising outlook mainly on infrastructure projects such as the MRT Line 2 and light rail transit Line 3 as well as the high-rise property development. 

Maintain “buy” for Econpile with an unchanged TP of RM1.27 based on 13 times price-earnings ratio. — BIMB Securities Sdn Bhd, May 20

This article first appeared in The Edge Financial Daily, on May 21, 2015.