KUALA LUMPUR: Econpile Holdings Bhd is expected to secure additional projects with the potential upturn in the construction sector, leveraging its prominent position in railway projects.
RHB Research stated in a note that the Penang Light Rail Transit may potentially see around RM200–RM300 million worth of piling works.
"Regarding the Sungai Klang Link elevated highway project, management is targeting to secure a letter of intent by mid-CY24, with the actual contract award to ensue thereafter.
"Piling and substructure works are expected to make up 10–15 per cent of the total construction costs of RM10 billion for the 53-kilometer project," it said.
Econpile's sluggish performance for the second quarter ended December 31, 2023 (Q2 FY24) was attributed to the Johor Bahru-Singapore Rapid Transit System Link project (completed in Q2 FY24), which achieved a lower-than-expected actual margin.
Aside from that, unforeseen soil erosion in some smaller projects caused delays and cost overruns.
"With the majority of lower-margin projects nearing completion, we are confident in the group returning to black in FY25," said RHB Research.
The firm added that Econpile's outstanding orderbook of more than RM400 million will keep the group busy for the next year. Year-to-date new wins are RM392 million, including a road upgrade at Cameron Highland, SOHO projects and Eden Residence.
"Econpile holds a tenderbook of RM1 billion, with 70 per cent allocated to the private property sector while the remainder is for infrastructure and industrial jobs. This encompasses affordable housing projects in Johor, commercial development projects, data centre jobs, a bridge project in Pahang, an E&E-related project in Kedah, and two Cambodian projects.
"Moving forward, Econpile plans to maintain prudence in its tendering activities by considering higher margins to offset the risks associated with the escalation of material prices."
The firm lifted its forecast earnings for the company by 11 per cent to 18 per cent for FY25–26 after factoring in a higher job replenishment rate of RM800 million and RM600 million.
It maintained 'buy' on the stock with a target price of 71 sen.