WHEN Econpile Holdings Bhd made its debut on Bursa Malaysia, the counter’s initial public offering was priced at 54 sen, valuing the company at RM288.9 million.

Two years and three months later, the piling company’s share price more than tripled to RM1.71 last Thursday, giving it a market capitalisation of RM915 million — overtaking its larger peer Pintaras Jaya Bhd.

Year to date, Econpile has gained 57% and reached a peak of RM1.77 on Sept 23 after the announcement of record high profit and revenue. Furthermore, Econpile has managed to replenish its order book fast. Its outstanding order book was at RM641 million as at August.

The company posted a net profit of RM65.98 million, or 12.33 sen per share, on revenue of RM462.1 million in the financial year ended June 30, 2016 (FY2016).

Given the dim economic outlook, however, there are concerns over whether the construction-related stock’s rally has legs.

Econpile CEO Raymond Pang, though, is optimistic that the group will see another record-breaking year in FY2017. He expects its current financial year to be better than FY2016 as it expects to secure more large-scale projects.

“Every year, we target a 15% growth in bottom line. But we have surpassed our estimate every year,” Pang tells The Edge over the phone. He says the industry’s outlook is more positive in FY2017.

Pang expects the construction sector to be robust, as both the public and private sectors are calling for tenders for various infrastructure and property projects. This offers Econpile ample growth opportunities.

Pang says the group’s future growth correlates with its outstanding order book, which will drive its revenue for the next two to three years.

Fund managers contacted by The Edge say Econpile is a good proxy for the local construction sector.

“I like the stock because I think the company is in the right sector — construction — which is still in favour. Although its upside could be limited after the recent run-up, it is a good counter. It is not a stock to sell,” says a fund manager with a foreign asset management firm, who pointed out that Econpile has a good mix of contracts that can sustain its profit margin.

Another foreign fund manager highlights that Econpile’s strength lies in its ability to operate on different soil conditions and meet the piling requirements of highly complicated projects. Besides that, it has a sizeable amount of piling equipment to cater for mega infrastructure projects. “We expect [further] growth for Econpile as it is in a very specialised piling industry,” he says.

The jobs in the group’s order book include Menara Felcra in Jalan Sultan Yahya Petra, Setia SPICE Hotel in Penang, SqWhere in Sungai Buloh and the East Klang Valley Expressway.

Pang says, “Our order book replenishment is healthy. For FY2017, we have set a target of no less than RM500 million. We are confident that we can do better than last year.”

In FY2016, Econpile secured about RM662 million worth of new jobs, exceeding the previous high of RM464 million in FY2015.

The group is bidding for contracts that carry a total value exceeding RM1 billion. They include jobs in large-scale developments such as Bukit Bintang City Centre, Damansara Town Centre, Tun Razak Exchange, Bandar Malaysia and high-density, high-rise affordable homes.

“We are in a [strong] bidding position. Any jobs, if we can secure them, will easily be worth about a few hundred million,” says Pang.

Apart from major infrastructure projects such as the Klang Valley Mass Rapid Transit 2 and Light Rail Transit 3 extensions, the group is also eyeing opportunities to support the construction of highways such as the Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) and Damansara-Shah Alam Elevated Expressway (DASH), he remarks.

Econpile’s stellar earnings are also attributed to its profit margin, which is wider than the industry average.

“At one time, our margin was narrower than our peers’, but we have moved away from infrastructure works to the property sector, which has better margins,” says Pang, who is the second largest shareholder of the company with a 30% stake.

Econpile’s largest shareholder is The Cheng Eng, the company’s founder and managing director, with 32% equity interest.

Pang expects the group to maintain a reasonable earnings before interest, taxes, depreciation and amortisation (Ebitda) margin of at least 20%. This is because he aims to continue improving its operational efficiency to achieve faster delivery, which will contribute to its performance.

The group recently incorporated a company to undertake a housing project in Klang, Selangor, with a potential gross development value of RM30 million.

“This is to realise the value of our three-acre agricultural land, and we are looking for a small developer to develop it,” says Pang.

The project could be a launch pad for the company to venture into property development. “The property market is in the worst time now. I think it is time for us to get ready,” he adds.

Malacca Securities’ Kenneth Leong recently revised Econpile’s target price higher to RM1.95, based on its higher price-earnings ratio (PER) of 13 times.

“Previously, we only based a PER of 11 times on Econpile’s FY2017 earnings per share of 14.4 sen, but generally, PER in the construction sector has gone up to 13 to 16 times,” he comments.

Leong opines that Econpile’s order replenishment is exceptionally strong, as it has a high chance of securing new projects since not many companies are competing.

As at last Thursday, Econpile was trading at a PER of 13.87 times while its peers, Pintaras and Ikhmas Jaya Group Bhd, were trading at 32.45 and 18.43 times respectively.

BIMB Securities Research analyst Nurzulaikha Azali raised her target price for Econpile to RM2.02 recently, after revising the group’s earnings projection for FY2017 and FY2018 higher by 16.3% and 26.2% respectively.

She is forecasting a net profit of RM83.2 million or 15.5 sen per share for FY2017 and RM96.6 million or 18.1 sen per share for FY2018.

According to her report dated Sept 28, Econpile’s FY2017 order book replenishment is set to reach a record high as the group is poised to secure sizeable property and infrastructure projects. 

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