PETALING JAYA: RHB Research is optimistic on Econpile Holdings Bhd ’s prospects to secure more projects, including mega ones, in the next two years.
Mega projects such as the Sungai Klang Link (SKL) elevated highway and the Mass Rapid Transit 3 may lead to a turnaround in the group’s results for the financial year 2025 ending June 30 (FY25), the research firm said in a report.
After a sluggish second-quarter performance for financial year 2024 (2Q24), the research house is confident of the piling and foundation specialist group returning to black in FY25, given that most of its lower margin projects are nearing completion.
“With the potential upturn in the construction sector, we anticipate Econpile to secure additional projects, leveraging its prominent position in railway jobs.
“We understand from management that the Penang Light Rail Transit may potentially see around RM200mil to RM300mil worth of piling works,” said RHB Research.
On the SKL project, Econpile management is targeting to secure a Letter of Intent by mid-2024, with the actual contract award to ensue thereafter.
The research house added: “Piling and substructure works are expected to make up 10% to 15% of the total construction costs of about RM10bil for the 53-km project.”
RHB Research, which maintained a “buy” call on the stock, has set a new target price of 71 sen to reflect improved momentum in new job wins and more favourable market sentiment in the construction space.
“We lift our FY25-FY26 earnings forecast by 11% to 18% after factoring in higher job replenishment rates of between RM800mil and RM600mil,” it said.
Operational wise, RHB Research said the group’s outstanding order book of over RM400mil will keep its busy for the next financial year.
Year to date, new wins is at RM392mil, including a road upgrade at Cameron Highland (RM66mil), small office-home office projects (RM101mil) and Eden Residence (RM83mil).
Econpile holds a tender book of RM1bil, with about 70% allocated to the private property sector while the remainder is for infrastructure and industrial jobs.
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, said RHB Research.