KUALA LUMPUR: Engtex Group Bhd is well positioned to benefit from the revival of water infrastructure projects as well as the initiative to reduce non-revenue water (NRW) from 34 per cent in 2020 to 25 per cent by 2025.
Kenanga Research said there was a line- up of pipe replacement programmes under the 12th Malaysia Plan (12MP) in Selangor as well as nationwide.
The firm said the latest statistics from Suruhanjaya Perkhidmatan Air Negara (SPAN) pointed to 70-75 per cent of NRW stemming from leaks, bursts, and damages to pipes and fittings.
"We understand that Eengtex is the only maker of large-diameter MS pipes of up to three metres locally, used in upstream water supply projects.
"Meanwhile, it is one of the only two producers of ductile iron (DI) pipes locally (the other being Penang-based YLI holdings Bhd). Highly corrosion- resistant, DI pipes are widely used in water distribution.
"Given the outlook on the scheme, we expect their manufacturing segment to be a beneficiary of the NRW project," it said.
Year to date, Engtex has secured new contract wins of RM151 million from the Sungai Rasau Treatment plant's main contractors i.e. Gamuda Bhd (for Package 1) and Taliworks Corporation Bhd (for Package 2 and 3).
Currently, Engtex's outstanding order book stands at RM285 million while potential tender stands at RM623 million.
Kenanga Research initiated coverage on Engtex with an "Outperform" call and target price of 77 sen.
"We like Engtex for the huge potential in the water pipe replacement market locally and its dominant market positions in both large-diameter MS pipes and DI pipes.
"We also like the company for its strong earnings visibility underpinned by significant order backlogs and a strong pipeline of new projects," it added.