KUALA LUMPUR: AmInvestment Bank Research sees more upside for piling companies Econpile Holdings Bhd and Ikhmas Jaya Group Bhd due to the strong news flow this year.
It said on Wednesday the two companies under its coverage continued to secure new jobs that will sustain earnings until 2019.
“Demand for specialist construction works such as piling remains robust. This is in line with our overall view for the construction sector, which will benefit from key infrastructure projects this year and big property developments,” it said.
AmInvestment said based on the track record and market share, it believes Econpile and Ikhmas will benefit from contract flows of these projects.
“YTD FY16F ending June, Econpile has secured RM447mil worth of new jobs (FY15: RM490mil). This surpassed our previous new order book target of RM400mil.
“Hence, we have increased our replenishment target to RM500mil, in anticipation of more wins in 4Q16.
“As for Ikhmas Jaya, it announced RM438mil worth of new jobs YTD. Out of the total, two contracts are for piling works while the contract for the 10 Stonor project entails both superstructure and foundation works and the Opus project comprises building works,” it said.
AmInvestment said Ikhmas has an outstanding order book of RM708mil (last until August 2019).
It said Ikhmas’ prospects remain bright based on its tender book of RM3bil. As the group has already achieved 88% of the research house’s new order book target of RM500mil for FY16F, Ikhmas may surpass its target order book expectations.
“As such, we believe there is further upside for upgrade,” it said.
The research house it was positive on the two piling companies as their focus was on specialist works, which command good margins, strong track record, and robust demand for piling works in the sector.
“We have a Buy call on Econpile with a raised fair value of RM1.90 a share (pegged at 14 times PE), after we roll-forward our base year to FY17.
“We also have a Buy call on Ikhmas Jaya with an unchanged fair value of RM1 a share – pegged at 12 times FY15F with a potential upside from exceeding our order book expectations. Both stocks are currently trading at 10 times and 9 times, respectively,” it said.
ECONBHD (5253) - AmInvestment upbeat on Econpile and Ikhmas Jaya
http://www.thestar.com.my/business/business-news/2016/04/20/aminvestment-upbeat-on-econpile-and-ikhmas-jaya/
