Re-rating for Econpile on Klang Link boost, meets 2025 target
KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) sees potential rerating catalysts for Econpile Holdings Bhd, driven by the prospect of faster-than-expected approval for the Sungai Klang Link project, which could contribute RM300 million to RM500 million worth of piling work.
In a research note, the firm highlighted that Econpile's year-to-date (YTD) contract wins for the financial year ending 2025 (FY 2025) have already reached RM300 million, meeting RHB's full-year target ahead of time.
Its latest contract marks the eighth award for FY 2025, which is a RM42.8 million subcontract from Irama Duta Sdn Bhd to carry out bored piling works for the Penang Light Rail Transit (LRT) project, covering the stretch from East Jelutong to Gelugor. Work is expected to commence in August 2025 and conclude by October 2027.
With this award, Econpile's outstanding order book has grown to about RM480 million. This includes jobs for condominium piling, bridge works, and mixed-use commercial developments.
Meanwhile, the company's tender book is valued at around RM1 billion, comprising opportunities from both public and private sectors.
RHB Research estimates the gross profit margin for the new LRT job to range between 5 per cent and 8 per cent.
Notably, prior to securing this subcontract, Econpile had already been involved in test piling for segment 1 of the Penang LRT.
"Based on our observation, the stretch between the East Jelutong and Gelugor stations is around 5km against the full estimated 24km length of segment 1 of the Penang LRT.
"This suggests there could be five piling packages in total, assuming each package covers about 5km. Hence, we do not discount the possibility of more piling awards taking place in the future," it added.
Following the new contract, RHB Research kept its earnings estimate, as the amount is within its FY 2025 job replenishment target.
The firm maintained its "buy" call on Econpile with an unchanged target price of 42 sen a share, derived by pegging forecast earnings per share for FY 2026 to a target price-to-book value (P/BV) multiple of 1.9 times.
"While our FY 2026-2027 earnings reflect growth versus the core losses incurred during FY 2022-2024, our projections have yet to match the levels seen in FY 2018, when core earnings were at RM87 million. This warrants us continuing to use P/BV to value the stock," it said.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Straits Times
30 minutes ago
- New Straits Times
IRB urges businesses to adopt e-Invoicing ahead of deadline
KUALA LUMPUR: Businesses ready to adopt the e-Invoice system are encouraged to begin the transition immediately, even if their mandatory implementation phase has not yet started. Inland Revenue Board (IRB) chief executive officer Datuk Dr Abu Tariq Jamaluddin said the agency welcomes early adoption from businesses, stressing that there is no need to wait for the official rollout timeline. "We encourage all traders who are ready to participate in the e-Invoice system to do so. They are actually welcome to join without waiting for the designated timeline," he told reporters after visiting Media Prima News and Current Affairs Division facilities in Balai Berita, Jalan Riong, Bangsar today. IRB on last Thursday said that the implementation phase for e-invoices for taxpayers with annual income or sales exceeding RM1 million but not exceeding RM5 million has been postponed to Jan 1, 2026. Meanwhile, the implementation phase for taxpayers with annual income or sales up to RM1 million has been postponed to July 1, 2026 Taxpayers with an annual income or sales below RM500,000 are exempted from the implementation of the e-Invoice system. The board said the decision was made after the government acknowledged the efforts of taxpayers, particularly micro, small and medium enterprises (MSMEs), to comply with e-invoicing legal requirements, which demand sufficient preparation time and pose numerous implementation challenges. E-invoicing has been implemented in phases since last year, with the first phase starting on August 1 for businesses with annual revenue over RM100 million. The second phase began on January 1 this year, extending the requirement to businesses with annual revenue between RM25 million and RM100 million. Abu Tariq said both phases have received a positive response, with more than 300 million e-invoices successfully submitted to date. He added that although there is no specific revenue target for the initiative, improved record-keeping is expected to lead to an overall increase in tax collection over time. "Our aim is not only to improve tax compliance but also to help businesses maintain more accurate and organised records. This will support better reporting and ultimately contribute to more effective tax administration. "We don't have a specific target for this initiative but we expect that with better record-keeping, tax collection should also continue to increase," he added.
Malaysian Reserve
2 hours ago
- Malaysian Reserve
Corporate earnings: Tepid 1Q results prompt target downgrades
Higher proportion of companies miss expectations amid persistent macroeconomic headwinds and policy uncertainty by RUPINDER SINGH MALAYSIA'S corporate earnings season for the March 2025 quarter (1Q25) ended with more disappointments than positive surprises, prompting research houses to revise their earnings forecasts and lower year-end targets for the FTSE Bursa Malaysia KLCI (FBM KLCI). Both Hong Leong Investment Bank Bhd (HLIB Research) and RHB Investment Bank Bhd (RHB Research) characterised the season as broadly underwhelming, with a higher proportion of companies missing expectations amid persistent macroeconomic headwinds and policy uncertainty, especially in the US. More Misses Than Beats In HLIB Research's coverage universe of 112 stocks, only 14% beat expectations, while 33% fell short and 53% came in line. 'On a sequential basis, the above-to-below ratio fell to 0.43 times from 0.73 times (consensus: 0.38 times from 0.57 times),' it said in a results round-up titled 'More Fizzle Than Sizzle'. Similarly, RHB Research noted that '34% of the companies we cover chalked numbers that missed expectations, while 14% beat', compared to the previous quarter where 31% missed and 28% beat. The firm described the outcome as 'broadly in line with our expectations, in view of the prevailing macroeconomic vulnerability exacerbated by the (US President Donald) Trump administration's mercurial trade initiatives'. The sectors that delivered positive surprises were construction and healthcare (RHB Research), and construction and gloves (HLIB Research). On the other hand, earnings disappointments were concentrated in the automotive, oil and gas (O&G), gaming, technology and property sectors. Notably, HLIB Research said earnings growth for its cover- age universe rose 3% quarter-on- quarter (QoQ), but declined 2% year-on-year (YoY), 'dragged chiefly by the gaming sector, IOI Proper- ties Group Bhd, Petronas Chemi- cals Group Bhd, Sime Darby Bhd and YTL Power International Bhd.' Target Cuts, Earnings Revisions Both research houses trimmed their FBM KLCI targets following weaker-than-expected earnings. HLIB Research slashed its end-2025 FBM KLCI target to 1,640 from 1,690, based on an unchanged 14.5 times price-to-earnings (PE) ratio, reflecting 'our reduction in core profit'. The firm now projects 2025/2026 FBM KLCI core earnings growth of +3.1%/+6.6%, compared to its earlier forecast of +6.1%/+5.8%. Meanwhile, RHB Research lowered its target to 1,600 points from 1,650, citing a 3.5% downgrade to forward earnings estimates since early 2Q25. 'We have also trimmed financial year 2025 (FY25) and FY26 earnings estimates for RHB Research's coverage universe by 2% and 1.6%,' it said. The FBM KLCI large-cap constituents saw modest negative adjustments, with the banking and O&G sectors contributing most to the downgrades. 'Negative adjustments in the bank and O&G sectors made up most of the cuts, exacerbated by lower earnings for IOI Corp Bhd and Sime Darby,' RHB said. Banks' guidance remained stable, though RHB Research flagged risks of 'lower loan growth and smaller margins from one Overnight Policy Rate (OPR) cut'. Tactical Opportunities Amid Uncertainty Despite the cautious tone, both research houses see tactical opportunities amid recent market pullbacks. HLIB Research believes its 'sell on strength' strategy has worked well, with the FBM KLCI down about 5% from its recent peak. 'We foresee investor clarity and confidence being restored in 4Q25, paving way for more sustained KLCI re-rating towards year-end,' it said. The firm recommends a 'buy on weakness' strategy focused on high-beta, domestic-centric names that have declined more than 10% year-to-date (YTD) or offer dividend yields above 4%. Among its top picks are CIMB Group Holdings Bhd, Sunway Bhd, Gamuda Bhd, 99 Speed Mart Retail Holdings Bhd, AMMB Holdings Bhd, IOI Properties, Dialog Group Bhd, Deleum Bhd and SMRT Holdings Bhd. RHB Research also advocates a similar strategy but with a defensive tilt. 'We still advocate a buy-on-weakness strategy centred around defensive, domestic-centric names,' it said. It cautions that 'near-term upside for equities will likely be capped by risks of further negative earnings revisions' and warns of lingering uncertainties due to 'the Trump administration's track record for unpredictability and frequent policy reversals'. Outlook Hinges on External Risks Both houses flagged external risks that could weigh on sentiment going forward, especially from US fiscal and trade policies. HLIB Research warned: 'We believe markets are not pricing in adequate US tariff and fiscal risks… it could manifest with a lag and potentially weigh on FBM KLCI performance in 3Q25.' RHB Research echoed similar concerns, highlighting second- and third-order effects from global trade deterioration and US fiscal strains. 'Potential US rate cuts, rising US debt levels, large US treasury bills issuances…raise the risk of a weaker US dollar, higher long-term bond yields, and potential mark-to-market losses for owners of long-dated papers.' While domestic liquidity remains ample, both firms agree that investor confidence may take time to recover. As such, stock-picking and timing will be key in navigating the remainder of the year. This article first appeared in The Malaysian Reserve weekly print edition
The Sun
5 hours ago
- The Sun
Tax Matters – Are independent directors employees or consultants?
ARE independent directors' employees of the company, or are they consultants providing services to the company? The treatment for e-invoicing, service tax and income tax will be dependent on the answer to this question. At the moment, the treatments adopted for e-invoicing, service tax and income tax do not seem to be aligned. The common thread running across the treatment of e-invoicing, service tax and income tax is whether the independent director is an employee or a consultant. This will be based on whether the director has entered into a contract of service or a contract for service with the company. There is no definition of either of the terms in the literature surrounding the above matter. The general understanding from case laws is that contract of service denotes that there is an employee-employer relationship, while a contract for service is for a consultant carrying on his profession or business. For e-invoicing purposes and service tax purposes, an independent director will be engaged under a contract for service since he will be providing independent views and expert opinion to the board of directors. Effectively, he is earning income as a consultant – therefore it is treated as business income. If this line of thinking is adopted for income tax, and in particular, the monthly deduction of tax (MTD), the independent director should not be subject to any MTD as he is not an employee of the company. What is happening in practice? In majority of the cases, companies are applying MTD to director fees and allowances received by independent directors. This is incorrect because independent directors are not employees receiving remuneration from companies for exercising employment. The correct approach should be for the Inland Revenue Board (IRB) to collect advance taxes through the bimonthly deduction mechanism using the CP500 approach instead of deduction through MTD. Independent directors who have a contract for services with companies should file their tax returns using Form B which is meant for individuals carrying on a business, and the filing deadline for such forms is June 30 every year, but the IRB normally grants a grace period up to July 15 to submit Form B. Directors who have a contract of service are treated as employees, and their income will be subject to MTD, and they need to file a Form BE by April 30 every year, but there is a grace period of up to May 15. Independent directors whose income exceeds RM500,000 annually need to issue e-invoices to the companies they serve for their director fees and allowances. They will also need to register for service tax and impose a service tax of 8% on their services provided. Deciding when the RM500,000 threshold is exceeded is based on reviewing your past 12 months and based on your forecast for the next 12 months. The time at which you register is not based on any tax year, but it is based on a 12-month 'rolling basis'. For e-invoicing purposes, the threshold of exemption has recently increased to RM500,000. This threshold is calculated based on the calendar year. The 2022 revenues are used as a starting point to decide whether the independent director should issue e-invoices. However, if the independent director in the subsequent years exceeds the RM500,000 threshold, then, depending on the level of income, e-invoicing has to commence. If, for example, the income from director fees is more than RM500,000 but less than RM1 million in calendar year 2025, it appears that you need to commence e-invoicing from July 1, 2026. If you are still in doubt, it is best to seek a written view or a confirmation from the IRB and the Royal Malaysian Customs Department to avoid any future disputes with both authorities.
