Case Study of Econpile Holdings Berhad (5253)

By Stella Goh – Market Data Analyst | 26 August 2019


Econpile Holdings Berhad is an investment holdings company established by the Group of Managing Director, Mr The Cheng Eng, which principally involved as a leading specialists’ provider for piling and foundation services in Malaysia. There are two wholly subsidiaries of companies under ECONBHD such as Econpile (M) Sdn Bhd and Tropical Broadway Sdn Bhd. Econpile (M) Sdn Bhd engaged in the business of piling and foundation services for property development while for Tropical Broadway Sdn Bhd engaged in the business of rental for investment property and machinery. ECONBHD also holds a Grade 7 License from the Construction Industry Development Board of Malaysia, which allows the Group to tender projects of unlimited values in the categories of building and infrastructure works.

Business Model

ECONBHD provides piling and foundation services such as earth retaining systems, earthworks, substructure and basement construction works, which are mainly for high-rise property development and infrastructure nationwide such as in Klang Valley, Penang, Johor, Pahang, Sabah and Sarawak. The notable projects completed since inception such as bored piling for Klang Valley Mass Rapid Transit, Pavilion Shopping Centre, as well as a deep basement for Elite Pavilion, W Hotel and The Residences. The company also involved in the construction of bridges, elevated highways, electrified-double tracking projects and power plants. ECONBHD also generates some recurring revenue from construction contracts and rental income such as investment holding rental of investment properties and machinery, trading of machinery and some related accessories at a full-fledged workshop located in Rawang.

Financial Review

Based on the past 5 financial years as above, the net profit for the year is increasing years by years start from FY2014 (+11.32%), FY2015 (+50.27%), FY2016 (+44.91%), FY2017 (+19.58%) until FY2018 (7.84%), marking its best-ever full-year net profit.

According to the Annual Report FY2018, it stated that the revenue derived from piling and foundation works for property developments contributed of RM548.5 million equivalent to 75.3% of the year 2018 group revenue (shown above), with a growth of 4.7% from RM523.3 million previously. While for the infrastructure and other projects, it increased more than three times from RM49.6 million, contributed to the remaining of RM179.9 million or 24.7%.

Gross profit increased 1.4% from RM130.1 million in FY2017 to RM131.9 million in FY2018 due to the larger proportion of infrastructure works. The gross profit margin lower from 22.4% in FY2017 to 18.1% in FY2018 mainly due to the hike of steel price.

ECONBHD also incurred with higher operating expenses of RM26.7 million in FY2018 from RM24.9 million in FY2017 due to higher expenditure managing the larger base of ongoing projects. It resulted in the finance costs of the company also increased by 41% from RM1.7 million in FY2017 to RM2.4 million in FY2018.

Based on the chart shown above, Since the finance cost is increasing from 2015 until 2018, is the company able to pay back its liabilities? Based on my computation of liquidity ratio, indicate that ECONBHD has a current ratio of 2.086 times in FY2018 compared to 2.177 times in FY2017. Although there is a slightly decreasing in this ratio, the company still do not face any liquidity problems and are capable of paying off the obligations when comes to due in FY2018 by using the current assets such as trade and other receivables, prepayments, other assets, cash and cash equivalents.

Cash Flow Statement

Net Cash from Operating activities in FY2018 amounted to RM11.3 million, which is lower than the FY2017 figure of RM52.8 million. But it still considers healthy with this amount of cash generated.

The Net cash from investing is decreased in FY2018, which is RM4.4 million, while RM 32.2 million in FY2017 due to lower capital expenditure.

Net cash from financing activities in FY2018 is in a negative figure which is (- RM19.2 million), while in FY2017 is (- RM22.452 million). It was due to 2 factor, lower dividend payout in 2018 camper to 2017 and debt reducing by paying back partial loan.

Total cash and cash equivalents of ECONBHD has decreased to RM24.2 million in FY2018 compared to RM36.4 million in FY2017 to fund the working capital requirements of a larger project portfolio.

Future Prospect & Challenges

According to Annual Report FY2018, management has stated that ECONBHD has an outstanding order book of RM1.1 billion and it successfully secured over of RM450 million in new projects, which comprising a healthy mix of new property development and infrastructure projects.

The biggest project is known as Pavillion Damansara Heights, which sits between two Mass Rapid Transit stations. In FY2018, they have carried out the basement works in Phase One as well as moving into initial stages of Phase Two. However, ECONBHD also successfully tendered for and won its first Light Rail Transit (LRT) contract amounting to RM208.7 million to undertake the bored piling and general infrastructure works for Packages GS04 of the 37 kilometres of LRT3 Line. Besides, ECONBHD also secured RM119.1 million contracts to perform the bored piling, projects, pile caps substructure and basement work for the redevelopment of TNB quarters. Last but not least, some investment banks stated that ECONBHD could be a potential beneficiary for the revival of East Coast Rail Link (ECRL) project. As a specialist’s contractors, ECONBHD may responsible for piling for this project. (Sources: TheSunDaily 15Apr2019)

How can ECONBHD maintain its strong record spanning for three decades? With experience technical expertise it helps the company to secure more jobs and capture for future growth. The strategies that they implement is to submit tender for property-related projects and optimise the fleet and workforce capability.

In line with the new government, it brings an adverse impact on the infrastructure sector in Malaysia. ECONBHD continues to tender for mixed development projects in Klang Valley to secure more property related jobs going forwards as their core expertise of piling works and substructure works in an urban environment. Besides, ECONBHD also enhances its operational efficiency by enhancing the skillsets of their workforce through extensive training to improve their business process with stringent planning and careful execution.

My Insight

Based on my calculation, Econpile Holdings Berhad has a fair value of RM1.446. The current market value of ECONBHD is RM0.785 (Based on 23 August 2019 is undervalued. While for dividend, ECONBHD has declared a first single-tier interim dividend with a total of 1.6 Sen in respect of FY2018. Based on the AR 2018, the dividend payout of RM21.4 million constitute of 24.6% of net profit in FY2018 thus complying with a minimum of 20% dividend policy. ECONBHD also have a beta of 1.783 (500days) indicates that the company has slightly volatile than the market. Based on my computation of CAGR calculation, ECONBHD has an expected market return of 6.24%.

In my opinion, the prospect of this company is very exciting because ECONBHD successfully secured a few projects and this company have a very strong fundamental. Even though the Return on Equity has a slightly decreasing from FY2016 to FY2018, it still able to achieve an ROE with double-digit which is 23.563 times. I believe that the company can achieve a fantastic performance in the future.


The research information and financial opinions expressed by website are for information and education purpose only. We do not make any recommendation for the intention of trading purpose or advice. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur. You should not rely upon the material and information on this website. We will not be liable for any false, inaccurate, incomplete information and losses suffered from you. You need to do your research to make your own investment decision wisely.

Case Study of Perak Transit Berhad (0186)

By Stella Goh – Market Data Analyst | 19 August 2019


Perak Transit Berhad is an investment holding company, which principally involved in the operations of an integrated terminal complex and provides public transportation services in Malaysia. It has an integrated public transportation terminal (IPTT) in Ipoh, Perak which is also known as Terminal Meru Raya (New Name), before that it is known as Terminal Aman Jaya.

On 5 September 2008, Perak Transit Berhad was incorporated as a private limited company in Malaysia. While on 6 October 2016, it has been listed in ACE Market and successfully transform into Main Market listed in Bursa Malaysia on 19 December 2018.

Business Model

Perak Transit Berhad has a robust recurring income-driven from Terminal Meru Raya (Aman Jaya) in Ipoh, Perak. Besides provide management services for bus operations, they also diversify their business into different sectors such as rental space for advertisement, seminar room, office, shop, booth, kiosks, bus services and petrol station operation. Their primary revenue of this company comes from Bus Services and Petrol Station Operation. Under the government’s development of blueprint, the operation of bus terminal by Perak Transit became a monopolised business model in Perak.  All the buses, as well as taxi, are charged entrance fees and other fees (included with tax) for the usage of basement car park and lavatory. Besides, all buses will refill the petrol at the designated petrol station owned by Perak Transit Berhad before they set off to a specific location.

Based on the past five financial years as above, the profit for the year is increasing years on years start from FYE2014 (+86.92%), FYE2015 (+42.32%), FYE2016 (+13.22%), FYE2017 (+33.56%) until FYE2018 (+24.18%). According to Warren Buffet, he said that he only would consider for the company which have listed for about ten years or above. For PTRANS, it listed on FYE2016 until FYE2018 which is three years. It does not meet the requirement for Warren Buffet. However, the revenue, EBITDA, total assets of the company also keep on increasing years by years.

The most important thing that an investor will concern is since the borrowings for the company are increasing due to the business expansion, is the company able to pay back his liabilities? Based on my computation of liquidity ratio, we indicate that PTRANS have a slightly decreases in the current ratio in FY2018, which is 1.1910 times compared to FY2017, which is 1.5071 times. However, PTRANS still do not face any liquidity problem and it even capable of paying off the obligations when it comes to due in FY2018 by using the current assets such as inventories, trade and other receivables, other assets, cash and bank balances.

Cash Flow Statement

Based on the cash flow statement of PTRANS, the Net Cash from Operating activities in FY2018, which is RM27,211,160 is lower than FY2017, which is RM40,719,562. Is this a bad sign for the company? If we look more closely, you will realise PTRANS paid out a massive amount of the trade and other receivables and buy more other assets in FY2018 which cost him RM16,692,674 and RM4,799,623. While in FY2017 trade and other receivables only cost him RM506,605 and RM4,799,623 in other assets which are lower than FY2018. Therefore, it results in the net cash from operating activities decreased in FY2018 when compared to FY2017.

Based on the cash flow from investing activities, the Net cash from investing activities is increasing in FY2018, which is RM80,875,258 from RM74,538,392 in FY2017. It was due to purchase more new property, plant and equipment in FY2018, which cost him RM81,353,339, which is higher than FY2017 with the amount of RM71,245,621. Therefore, it results in the net cash from investing activities was higher in FY2018.

While based on the cash flow from financing activities, the net cash flow from financing activities in FY2018, which is RM50,294,965 is higher compared to FY2017, which is RM25,028,092. An increase in this number indicates that the cash has come into the company will help to boost the asset levels.

Future Prospect & Challenges

Perak Transit (PTRANS) has built a new bus terminal in Kampar. I believe that the Kampar Terminal will be served well as a transportation hub in the university town with UTAR, TARC and Westlake International School amidst a growing population. However, based on The Edge newspaper, the full certification of completion and compliance (CCC) has yet to be received as inspection are still ongoing, while the management is also addressing some issues of the routing of electricity to supply in Terminal Kampar, it shall be resolved in the 4th Quarter of FY2019. They expect that the terminal can be fully operation start in 1st Quarter of FY2020, which is after 2 to 3 months of renovations work for new tenants.

According to the Managing Director Dato’ Sri Cheong Kong Fitt, has stated that the bus terminal is the core business for the company which intends to expand more for future earnings growth. PTRANS had received a Letter of Intent from SPAD on the appointment as network operator for the SBST Programme for a period of 8 years. Following by the Terminal Kampar’s operational commencement, the management will subsequently look to take the new project next year to replicate experience and expertise from operating terminals Aman Jaya and Kampar to develop the new bus terminals in Bidor and Tronoh which would individually cost between RM150 million and RM200 million with two years construction period. Besides, Bidor and Tronoh, Perak Transit also has been acquiring land in Kinta but also exploring opportunities for construction and management of Terminal in Termerloh, Pahang, Kemaman, and Terengganu.

My Insight

Based on my calculation, Perak Transit Berhad has a fair value of RM0.947. The current market value of Perak Transit Berhad is RM0.19 (Based on 15 August 2019). However, for the Discounted Earnings Model, it shows that Perak Transit currently is undervalued. PTRANS is committed to maintaining its dividend payout around 35%, which is above the official policy of 25% or more. As a side note, the management has guided that the dividend payout would now occur twice a year (from three times a year previously). (Sources: The Edge). PTRANS also has a beta (500days) of 0.863 indicates that the company is less volatile than the market. Based on my computation of Compound Annual Growth Rate (CAGR), PTRANS have an expected market return of 6.18%.

In my humble opinion, although the company share capital is vast and the debt is high, we can see that the prospects of this company are very bright. I believe that the company can sustain the business with stable income with stable recurring income.


The research information and financial opinions expressed by website are for information and education purpose only. We do not make any recommendation for the intention of trading purpose or advice. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur. It would help if you did not rely upon the material and information on this website. We will not be liable for any false, inaccurate, incomplete information and losses suffered from you.

CFA Level I Financial Reporting and Analysis (Part IV)

By Stella Goh – Market Data Analyst | 8 August 2019

Today, I would like to talk about the last two readings in this chapter. Hopefully, all of you have a better understanding of my previous articles. In this study session, it introduces more about the quality of financial reporting. Candidates can learn what the differences of financial reporting quality that may exist in a company and what is the objective to identify them are. Let’s look at what we can learn in Reading 31 and Reading 32.

Reading 31 Financial Reporting Quality

In reading 31, candidates can have a better understanding of the concept of financial reporting quality. The International Accounting Standards Board (IASB) and the Financial Accounting Standard Board (FASB) are setting up the accounting standards to produce a high quality of financial reports which can lead to increase in the degree of relevance, faithful representation, comparability, timeliness, verifiability, and understandability in the financial statement. A proper financial report can provide analysts or investors to have an appropriate assessment of the company’s performance and prospect, helping them to make a sound investment decision. Whereas financial reporting contains inaccurate, misleading or incomplete information will lead the investors or analysts to suffer losses in their investment but also will reduce the confidence in the financial system.

Candidates are also able to learn how to distinguish between financial reporting quality and quality of reported results, which are also known as quality of earnings. Quality of earnings refers to the proportion of income attributes to the core operating activities of a business. The terms of ‘quality of earnings’ is used in practice to encompass the quality of earnings, cash flow and balance sheet items in a company. The concept of earnings quality and financial reporting quality are interrelated because there is a correct assessment of earnings quality only when the necessary level of financial reporting quality achieved.

The differences between conservative accounting and aggressive accounting, also will be discussed in this reading, together with some examples provided in the textbook. Conservative accounting is a practice that understates the financial performance of a company. It arises in a period when the management has exceeded the targets before the end of the period, they started to decrease the company’s reported performance and financial position in the current period and may increase its reported performance and financial position in a later period. While for aggressive accounting, it is a practice that used to obscure the poor performance where the financial performance will be overstated. It is also possible for poor reporting quality to occur the paint the company with high-quality earnings. Some of the companies are pressured to do so because they can present the company’s performance in the best light for investors and analysts. However, aggressive accounting will expose investors and managers to more risks because they are less likely to manage the risks carefully if they are more comfortable with their performance.

Furthermore, candidates are also able to learn on the: –

  • Spectrum for assessing financial reporting quality
  • Motivations cause management issues financial reports with low quality
  • Conditions that are conducive to issue fraudulent financial reports
  • Presentation choices, such as Non-GAAP measures
  • Accounting warning signs/methods to detect manipulation of information in financial reports

Reading 32 Financial Statement Analysis: Applications

In the last reading of this chapter, candidates can have a better understanding of how to evaluate a company’s past financial performance and explain how a company’s strategy is reflected in the previous financial performance. There are two types of analysis, such as cross-sectional analysis, and trend analysis are used by investors or analysts to measure the company’s historical performance over time. Cross-sectional analysis is a type of analysis which investors or analysts use to compare a firm’s ratio with some chosen industry’s benchmark or with its peers to produce unique insights for that industry. While for trend analysis, also known as time series data analysis, is a type of statistical technique which used by investors or analysts to predict the future stock price movements or performance by analysing the historical trends of data within the market.

Besides, candidates are also able to learn how to project future financial performance. Projection of future financial performance is used to determine the value of a company or its equity components. It may also use by credit analysis to project the finance or acquisition finance to determine whether a company cash flows are adequate to pay their interest and principal on its debts. Moreover, it will also be used to evaluate whether a company will likely remain in compliance with it financial covenants. Here are some of the examples source of data for analyst projections: company projections, company’s previous financial statements, industry structure and outlook, and macroeconomic forecast.

Furthermore, candidates also able to learn more on these together with some examples provided in the textbook: –

  • Describe the role of financial statement analysis in assessing the credit quality of a potential debt investment
  • Describe the use of financial statement analysis in screening for potential equity investments
  • Explain appropriate analyst adjustments to a company’s financial statements to facilitate comparison with another company.


In conclusion, based on these 2 readings, candidates can have a better understanding on selected applications of financial analysis, how to evaluate the past financial performance, projection of future financial performance, assessment of credit risk, and the screening of potential equity investment. However, analysts must know the financial reporting standard very well because the standard evolves, analysts must stay together with the current standards to make the right investment decision. Last but not least, it is essential that candidates must be familiar with the materials covered in this topic since this topic also carry a quite higher percentage of marks in the exam.

CFA Level I Financial Reporting and Analysis (Part III)

By Stella Goh – Market Data Analyst | 2 August 2019

I hope you have a better understanding of what are the majors’ things of the financial statements after reading my previous article. This current article is a continuation from the last blog titled “CFA Level I Financial Reporting and Analysis (Part II)”. Today we will talk about content we can learn from reading 27 to reading 30.

Reading 27 Inventories

In this reading, candidates can have a better understanding of what are inventories in the balance sheet. The merchandisers, such as wholesalers and retailers, will purchase the stocks and sell it to generate profits. There are three types of inventories, which are raw materials, work-in-progress and finished goods. Raw materials are materials in the primary production or manufacturing of products. Work-in-progress’s list refers to the stocks that have started the conversion process from raw materials into finished products but not yet complete.

Finished products relate to the goods that have been finished by the manufacturing process and ready for sale.

The most exciting things candidates can learn in this reading are that they can know the three different types of inventory valuation methods as below:

1. Weighted-Average Cost Method

2. First In, First Out (FIFO),

3. Last In, First Out (LIFO).

For companies in the United States, they operate under US Generally Accepted Accounting Principles (US GAAP) allows for all three methods. While for International Financial Reporting Standards (IFRS), it only permits the Weighted-Average Cost Method and First In, First Out Method.

Moreover, candidates are also able to learn on: –

  • How to distinguish between cost included in inventories and price recognised as expenses
  • Explain how inflation and deflation of inventory costs affect the financial statements and ratios of companies that use different inventory valuation methods
  • Explain FIFO reserve and LIFO liquidation together with their effects
  • Convert the company’s reported financial statements from LIFO to FIFO
  • Explain the issues that analysts should consider when examining a company’s inventory disclosures and other sources of information
  • Calculate and compare the ratios of companies, including companies, use different inventory methods.

Reading 28 Long-Lived Assets

In Reading 28, candidates can have a better understanding of such as the acquisitions of long-lived assets, allocation of the costs of long-lived assets over their useful lives, and accounting for de-recognition of long-lived assets. Long-lived assets are also known as non-current assets which classify into tangible assets, intangible assets and financial assets which can retain for more than one year.

Tangible assets are physical and measurable assets that in a company’s operation such as property, plant and equipment. It is sometimes used as a fixed asset such as land, buildings, furniture and fixtures, machinery and equipment, and vehicles — intangible assets, also known as non-physical assets such as goodwill, brands, recognitions and intellectual property. Intellectual property includes patents, trademarks, and copyrights. While for financial assets, it includes investment in equity or debt securities issued by other companies.

Besides, candidates are also able to learn on: –

  • Revaluation model based on the changes in fair value of an asset
  • Concepts if impairments such as an unexpected decline in value of an asset
  • Describes financial statement presentation, disclosures, and analysis of long-lived assets
  • Differences in financial reporting of investment property compared with property, plant and equipment
  • Explain and evaluate how leasing, purchasing assets, finance lease and operating lease affect the financial statements and ratios from the perspective of both the lessor and lessee.

Reading 29 Income Taxes

In this reading, it will focus more on income tax accounting and reporting. Income tax refers to the tax imposed by the government on income generated by business or individual within their jurisdictions. Every taxpayer must file an income tax return annually to determine their tax obligations. Government collect taxes to fund their activities such as provides goods for citizens, pay government obligation. The analysts will find it challenging to analyse income tax expenses. It was due to various permanent and temporary timing differences between accounting that are used for income tax reporting and the accounting in the company’s financial statements.

Besides, candidates are also able to learn on how to differentiate between the taxable income and accounting profit, recognition and measurement of current and deferred taxes, calculation on the tax base of a company’s assets and liabilities together with some examples provided in the textbook. Moreover, candidates are also able to learn on: –

  • How to explain the deferred tax liabilities and assets are created
  • Factors used to determine how a company’s deferred tax liabilities and assets should be treated for financial analysis
  • Evaluate the effects of tax rate changes on a company’s financial statements and ratios
  • Identify the key provisions of and differences between income tax accounting under International Financial Reporting Standards (IFRS) and the US Generally Accepted Accounting Principles (US GAAP)

Reading 30 Non-Current (Long-Term) Liabilities

In reading 30, it focuses more on bonds payable, leases together with the pension liabilities. Non-current liabilities, also known as long-term liabilities, are the obligations that arise from different sources of financing and various types of creditors. For examples, bonds, payables, finance lease, deferred tax liabilities, and so on. Bonds, also known as a fixed-income security, is a type of debt instrument created to raise capital to finance their projects and operations. Usually, it is issuing by the corporation, cities, and national government at a fair value.

Besides non-current liabilities, candidates are also able to learn how to differentiate between a finance lease and an operating lease. Finance lease and operating lease are a common form of lease agreements that an individual goes for it. A lease is an agreement wherein the lessor will grant rights to the lessee to use the lessor’s property in exchange for certain periodic payments. Moreover, candidates can also learn more on a pension, other post-employment benefits, and disclosure of defined contribution in this reading together with some examples provided.

Furthermore, candidates are also able to learn on:

  • How to describe the interest methods and calculate the interest expenses and interest payment
  • Amortisation of any bonds discount or premium
  • Derecognition of debts
  • Disclosure of information about debt financing
  • Calculate and interpret the leverage and coverage ratios


In conclusion, candidates will learn on the specific categories in financial reporting. Such as assets and liabilities, but also inventories, long-lived assets, income taxes, and non-current liabilities because they can bring effects to the financial statements. Besides, the specific categories in financial reporting also used to report the measures of profitability, liquidity, and solvency. Based on these, candidates and analysts can choose which accounting treatments are corresponding to the effect on the reported performance, and the potential for the financial statement manipulation.