RHB Investment Bank starts coverage of Econpile, target price 74 sen

TheEdge Mon, Aug 17, 2020 10:45am - 3 years View Original


KUALA LUMPUR (Aug 17): RHB Investment Bank Bhd has initiated coverage of Econpile Holdings Bhd at 60 sen, a "buy" rating and target price of 74 sen.

In a note today, RHB Investment Bank analysts Muhammad Danial Abd Razak and Eddy Do Wey Qing said Econpile’s advanced array of piling equipment thanks to aggressive expansion efforts have given the company strength despite the downturn in local activities, which should bolster its foothold, and enhance its ability to provide end-to-end piling and foundation solutions for clients.

Econpile’s order book is worth RM700 million, which should provide revenue visibility over the next two years, the duo said.

“The group is targeting RM500 million in new orders for FY21, having tendered for jobs locally and overseas. The share of infrastructure jobs may increase, as it expects to see more opportunities emerge in the local infrastructure space. Consequently, this should help to buffer the impact from the recovering property market,” they said.

Danial and Do also expressed hope for recovery of property demand, expecting government initiatives to stimulate construction activities and indirectly boost demand for piling works.

“Despite the challenges brought upon by Covid-19 and the collapse in oil prices in 1H20, prospects look brighter, as economic activities re-start and pick up.

“Activities in the property sector are likely to improve gradually, following multiple initiatives taken to hasten recovery. These include relief measures such as the Home Ownership Campaign (HOC), real property gains tax (RPGT) exemption, and the lifting of the loan-to-value cap,” the analysts said.

A good reputation among clients was cited by the analysts as an additional point of optimism for Econpile.

“Long-standing relationships with clients give Econpile a competitive edge. Its capacity is well-sized to absorb multiple jobs at a time, which gives it an edge in efficiently executing works and enhancing reliability. The group is able to handle up to RM1 billion in orders at a time.

“This adds to its credentials, and helps to form strong business relationships with major construction and property development clients. As long as the requirements and specifications are diligently met, Econpile stands a good chance of securing more new orders from these clients,” the analysts added.

They said potential downside risks to their rating include failure for the company to secure new contracts, intensifying competition among piling contractors, and a prolonged downturn in the retail and property markets.

At 9.56am, shares of Econpile dipped 0.5 sen or 0.84% to settle at 59 sen, which values the piling market leader at RM795.81 million with around 98,500 shares traded.

The counter has rebounded from its yearly low of 31 sen on March 23, but remains 21.85% lower from 75.5 sen since the beginning of the year.

The content is a snapshot from Publisher. Refer to the original content for accurate info. Contact us for any changes.






Related Stocks

ECONBHD 0.490

Comments

Login to comment.