Econpile Holdings Bhd ('Econbhd') is involved in the provision of foundation and geotechnical works, civil engineering works, structure works and design and build packages.
Recent Financial Performance
Econbhd's profits have been rising gradually due to improved profit margins. Revenue, which was suffered a minor pullback in mid-2015, is again on a rising path.
Table: Econbhd's last 8 quarters' P&L
Chart 1: Econbhd's last 9 quarters' P&L
Financial Position
Econbhd's financial position is deemed healthy as at 31/3/2016 with current ratio at 2.4x and total liability to equity at 0.6x. Debtor collection period stood at 184 days- comparable to Pintaras's 206 days.
Valuation
Econbhd (closed at RM1.39 yesterday) is now trading at a trailing PER of 11.8x (based on last 4 quarters' EPS of 11.76 sen). At this PER, Econbhd is considered fairly valued. However, Econbhd's earning grew by 61% compared to the preceding 4 quarters. Assuming it can achieve a CAGR of 20%, its PEG ratio would be less than 0.6x. This would make the stock quite attractive.
Technical Outlook
Econbhd broke above its triangle at RM1.15 in late March. With this breakout, Econbhd's upleg has begun.
Chart 2: Econbhd's weekly chart as at Jun 9, 2016 (Source: ShareInvetor.com)
After the upside breakout, Econbhd consolidated between RM1.30 & RM1.40. It has just broken above this consolidation (an ascending triangle) at RM1.40. Is this a continuation of the upleg move or is it a fake breakout prompted by a dividend payment of 2.5 sen? We will have to wait and see.
Chart 3: Econbhd's daily chart as at Jun 9, 2016 (Source: ShareInvetor.com)
Conclusion
Based on good financial performance & position, fair valuation & mildly bullish technical outlook, Econbhd could be a good stock for long-term investment.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Econbhd.
4 comments:
Hi Alex ,
Can you please comment on Malton fundamental outlook ?
Many thanks !
Hi luckystock2
Malton is a profitable property investment company. Its profit peaked in FY2011 and rolled back over the past 4 years. At the price of RM0.675, Malton is trading at a PER of 9.5x based on last 4 quarters' EPS of 7.11 sen. While PER is nothing to shout about, the stock is trading at an attractive price to book of 0.42x (based on NTA of RM1.59 ps as at 31/3/2016).
Malton is struggling to hold onto its long-term uptrend line support at RM0.65-0.67. If it goes below this uptrend line, it may test its horizontal support at RM0.60 & RM0.50. On the other hand, if earnings starts to roll in, the stock can stage a rebound from the uptrend line.
My reading of Malton is neutral. The share price has declined sufficiently to attract some buying.
Hi Alex,
Would like to know what is your comment on Armada (during the recent acquisition by AMANAHRAYA TRUSTEES BERHAD) and GHL System ?
Thanks a lot !!
Hi martinkakashi
My take on the following stocks:
1) Armada
It has found a temporary bottom (at the very least) at RM0.70. It is likely to trade sideways from here. I don't rule out short rallies from time to time. These rallies would however be capped at RM0.90-0.95.
Despite the recovery in crude oil prices, the massive investment in assets in this sector could be a continuous drag on margins for a long while. I believe Maybulk may be a model to follow when we look at O&G stocks that have over-invested in equipment or vessels. Chartering rate would be substantially lower than what they were in the heydays. Liquidation is not an attractive option as these assets value would be substantially lower than their cost. It's going to be a slow grind.
2) GHL System
It may continue to trade sideways for a while. On weakness, it may find support at RM0.70-0.75.
This company depends on consumer spending which is weak currently. When the economy picks up, its earnings should improve and the share price may recover.
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