Engtex poised to get more water pipe orders
PETALING JAYA: Engtex Group Bhd is likely to receive more water pipe orders following the recent annoucement of water tariff hike, according to Kenanga Research.

As the panel water pipe supplier of Pengurusan Aset Air Bhd, Ranhill SAJ and Pengurusan Air Selangor, the hike is expected to strengthen the groups’ cash flow as water operators kick start their capital expenditure programmes, said the research house.

The government has targeted to reduce the national non-revenue water (NRW) from 36% in 2021 to 15% by 2049.

It also noted that 70% to 75% of NRW is attributed to issues such as leaks, pipe bursts and damaged fittings.

“Based on our estimate, a 1% drop in NRW would cost roughly RM800mil.

“Engtex has estimated that there are pipes spanning over 6,292km in urgent need for replacement in Selangor, translating to 350,000 tonnes of pipes at a cost of about RM1bil,” it said.

Kenanga Research added that Engtex’s order book stood at RM229mil as of last November while its tender book was RM720mil.

Furthermore, the research house said steel prices had bottomed out and would likely stabilise at current levels.

This is consistent with an 11% rebound in hot-rolled coil prices since the low in late-October 2023.

Rising steel prices will lift the selling prices of Engtex’s steel products as its steel input cost had been locked in, resulting in margin expansion, according to the research house.

Additionally, the research house said the group had plans to divest its non-core assets and the proceeds would significantly reduce its net debt and gearing of RM495mil and 0.62 times respectively.

Kenanga Research said it would maintain its forecast for the financial year 2023 (FY23) but lift its FY24 expectation earnings by 69% to reflect strong pipe orders and overall margins.

The research house maintained its “outperform” call on the group.

“We raise our target price by 83% to RM1.41 to reflect sector valuation during the last upcycle in the water in 2014 triggered by the massive RM1bil Langat 2 water treatment plant with a capacity of 1,130 million litres per day following the completion of the Pahang-Selangor Raw Water Transfer project,” the research house added.
Corporate News,Engtex,WaterInfrastructure,WaterManagement,NRW,WaterTariffs,SteelPrices
Engtex Group Bhd is likely to receive more water pipe orders following the recent annoucement of water tariff hike, according to Kenanga Research.