Coastal Contracts - Lands Two More Vessel Contracts

THE BUZZ  

Yesterday,  Coastal  Contracts  announced  that  its  wholly-owned  subsidiaries,  Coastal Offshore (Labuan) Pte Ltd and Thaumas Marine Ltd, have collectively secured contracts for the sale of two units of Anchor Handling Tug Supply (AHTS) and one unit of Subsea Support Vessel (SSV) for an aggregate value of approximately RM111m.

OUR TAKE  

More  about  the  vessels.  We  understand  that  the  SSV  is  designed  to  transport  liquid cargo,  store  materials  and  equipment, move men  and material  between  platforms, and facilitate general subsea support, maintenance, transport and standby. The SSV is sold to  a  new  customer  in  United  Arab  Emirates  whereas  the  two  AHTS  are  sold  to  one  of Coastal’s loyal customers from Indonesia.

Positive  news  but  no  changes  to  our  forecasts.  This  is  because  we  had  earlier factored  in  some  orderbook  replenishment  for  this  company.  We  believe  that  the margins for the sale of the SSV may not be that lucrative as it is probably sold at a lower price in order to enter into a business relationship with a new customer.

New  orders  to  boost  orderbook  to  RM743m.  This  amount  is  expected  to  keep  the company busy until the end of 2013, fully utilizing the company’s yard. The new order is timely as it provides Coastal with a new business partner from the Middle East.

Maintain BUY. Our fair value for Coastal remains unchanged at RM2.44, based on the existing PE of 7x FY13 earnings. We will be visiting the management very soon to obtain a full update with regards to the company’s prospects post 2013.

Source: OSK