ECONBHD: Piling Specialist Maintains BUY Rating, Strong Order Book Offsets Earnings Adjustments

A leading piling and foundation specialist is poised for a positive earnings trajectory, with its core net profit for the second quarter of financial year 2026 (2QFY26) projected to be between MYR2 million and MYR3 million, an improvement from MYR1.9 million in the prior corresponding period. This anticipated growth, as highlighted in a recent RHB research report, is primarily attributed to higher progress billings stemming from a robust order book.

Performance and Order Book Strength

The company has demonstrated significant prowess in securing new contracts, clinching approximately MYR337 million worth of new jobs in the current financial year to date. This figure is nearing its internal target of MYR400 million for the full year and is comparable to the MYR390 million secured in FY25. Consequently, the latest remaining order book has reached approximately MYR700 million, a level not observed since 2QFY22, underscoring the firm’s operational strength and market position. The company also maintains an undemanding valuation, trading at a prospective FY27F Price-to-Book (P/BV) of 0.9x, significantly below its 10-year historical mean of 1.8x.

Adjusted Outlook and Future Catalysts

Despite the positive operational backdrop, RHB has made adjustments to its financial forecasts, trimming estimated earnings for FY26-28F by 2%, 3%, and 5% respectively. This revision reflects a more conservative imputation of job replenishment value for FY26, reduced from MYR600 million to MYR450 million. Additionally, the target Price-to-Book (P/BV) has been lowered from 2.1x to 1.8x. This adjustment is primarily to account for a potentially delayed timeline for key projects, such as the Sungai Klang Link (SKL) project, which is valued between MYR300 million and MYR500 million for piling works. While the SKL project is considered a significant rerating catalyst, its rollout is now expected later in FY27. A key downside risk highlighted is the potential for sluggish job awards.

Nonetheless, the company is expected to benefit from upcoming infrastructure project rollouts, leveraging its solid track record in railway and highway-related ventures. Notably, its Environmental, Social, and Governance (ESG) performance remains robust, with an overall score of 2.7 out of 4. The company recorded a 26% year-on-year decrease in Scope 1 and 2 emissions in FY25, demonstrating commitment to environmental stewardship.

Recommendation and Target Price

RHB maintains a BUY rating on the stock. While the target price has been adjusted to MYR0.44 (from MYR0.50 previously), it still implies a substantial upside of 91% from the last traded price of MYR0.23, based on the report’s valuation. This revised target P/BV of 1.8x for FY27F BVPS is in line with the company’s 10-year mean historical P/BV and incorporates a 6% ESG discount.