Econpile Holdings Bhd has been given a buy call by RHB Research in its maiden coverage of the stock.
Analysts Muhammad Danial Abd Razak and Eddy Do Wey Qing noted that the call was justified by a sharp recovery in the financial year 2021 (FY21), coupled with a scarcity of local piling specialists with robust equipment.
Econpile has been given a target price of 74 sen or 23% upside. “Our TP implies 17x 2021F P/E (near +1SD from its five-year mean) – justified by a sharp recovery in FY21, coupled with a scarcity of local piling specialists with robust equipment,” they said in a research report today.
Further, they believe that the second half of this year may offer “fresh catalysts”, therefore better earnings.
“If a bull case plays out for the sector, Econpile will likely benefit from an uptrend. The stock is trading at an attractive 14x P/E to 2021F EPS (below five-year mean),” they said.
Some of Econpile’s strengths, the analysts observed, include extensive market share as it is a dominant player in the local piling scene, an advanced array of piling equipment due to “aggressive” expansion efforts, and long-standing relationships with clients.
“Econpile is standing strong, despite a downturn in local activities,” they said.
The group’s orderbook is worth RM700 mil with “revenue visibility for over the next two years,” the analysts said, adding that Econpile had been targeting RM500 mil in new orders for FY21 after tendering for jobs both at home and abroad.
“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.
Downside risks to their call, the analysts said, include a failure to secure new contracts, intensifying competition among piling contractors, and a prolonged downturn in the retail and property markets.
Econpile opened 0.84% lower at 59 sen, valuing the piling company at RM789.12 mil.
