PETALING JAYA: CGS International Research is maintaining its “add” call on Econpile Holdings Bhd at 45.5 sen, with a target price of 61 sen as it expects the group to benefit from incoming infrastructure projects and the data centre boom.
Econpile is one of the few remaining local players capable of completing technically-demanding piling jobs, according to the research house.
In a report, it said there had been awards for flood mitigation projects, the Pan Borneo Sabah phase 1B and the revival of some failed projects in Sarawak in the last few months.
In particular for Sarawak, a concerted shift by the state government has been recognised as a way to get more local contractors to participate in tenders and be less reliant on Chinese contractors.Econpile’s tender book stands at RM1mil, of which 90% are property projects that have higher margins versus infrastructure projects.
“There are also three data centre tenders, each within the RM30mil to RM60mil range. Besides piling works, Econpile can also build the core and shell, but not the mechanical, electrical and plumbing works,” CGSI Research said.
While there is some urgency to replenish its order book with its rig utilisation at 50%, Econpile’s strategy is to save capacity as the influx of new projects may lift pricing by 15%.
“Econpile’s order book as at March 2024 amounted to RM400mil. The Pavilion Damansara Heights phase two podium works worth RM105mil, the main legacy project which had been a drag on its gross profit margin, appears to be at the tail end with a target completion of December 2024.
“Overall collection has also improved significantly over the past few months,” it said.It added that the key negatives for Econpile included the hike in diesel prices that resulted in concrete prices increasing between 5% and 7%.
“Existing projects in its order book may be impacted. We estimate that for every 1% decline in FY25 gross profit margin will shave FY25 net profit by 14%,” it said.