Coastal Contract Berhad---The most underrated oil&gas stock?

This week is a week filled with oil theme because of the brent oil has break 52 week high.So, the market started to focus on oil & gas stock such as Hibiscus,Carimin,Dayang,Armada,Uzma,RL,Hengyuan and others related oil&gas counters.

But one of the Oil & Gas company stock named Coastal (5071) was founded by me and put in my watchlist and it could be a huge potential stock in the future.

Coastal supposingly need to announce it's 4Q 2021 on August 2021 but due to the FMCO and current challenges of Covid-19 pandemic facing by the Company, the Board of Directors of Coastal Contracts Bhd wishes to inform that the Company would like to utilise the one month extension of time granted by Bursa Securities for the issuance of its quarterly report for the financial period ended 30 June 2021, on or before 30 September 2021.

The company successfully announce it's last quarter report on 28/09/2021 after market closed and the Quarter Report make me shocking and now the company valuation look attractive for me.

The company annonce the profit of 19.3 million on this QR together with the revenue of 49.3million, this QR revenue has achieved the highest revenue in the latest 7 quarters. This prove that the company already recover to the pre-covid revenue level.

The company achieved EPS of 3.68 sen on this QR, we briefly counted the valuation 3.68*4=14.72sen,if we briefly give PE 8, the company share price maybe valued by 1.18, now the stock price is locate at 76 sen, it possible still have 50% gainers.

Analysis on company revenue performance

Coastal has two business division which is Shipbuilding and Shiprepair Division and Vessel Chartering Division.Most of the company revenue is from Vessel Chartering Division so our main analysis wil focus on this business division

Vessel Chartering Division

Vessel Chartering division registered a greater revenue of RM48.7 million in 4Q2021, an increase of 40% quarter-on-quarter from RM34.8 million. Against 4Q2020, revenue was up by 5% from RM46.2 million. The better showing this quarter was principally due to full contribution from the newly acquired liftboat chartering business commencing this quarter. As at 30 June 2021, the Group's financial instruments measured and recognised at fair value on a recurring basis are as follows: The division's profit margin before tax of 53% (RM26.0 million) in 4Q2021 was higher than the 45% (RM15.5 million) and 41% (RM18.7 million) achieved in 3Q2021 and 4Q2020, respectively. The quarter-on-quarter increase in profit margin was mainly due to profit contribution from the liftboat chartering business. In 3Q2021, there were pre-operation costs incurred for the liftboat chartering business that led to lower margin in that quarter. The profit margin in 4Q2020 was comparatively lower as a result of higher finance costs and impairment of assets.

The above statement means that this division has recovery resilient from bottom and the oversupply problem on this division still exist but have improved very well.The main focus I found is liftboard chartering business started contributed group profit starting from this quarter.

Chartering of liftboats is self-propelled, multifunctional, self-elevating platform-based vessels with large open decks to support various offshore maintenance and construction works — via the acquisition of a Singaporean firm.

According to a Bursa Malaysia filing, Coastal Contracts' unit Coastal Drilling Pte Ltd (CDPL) and its strategic business partner JUB Pacific Pte Ltd have acquired stakes of 80% and 20% respectively in Elite Point Pte Ltd (EPPL) for S$8,000 (RM24,318.31) and S$2,000 on February 2021.The company ventured into liftboat operation business following acquisition of Teras Conquest 7 (TC7) from Ezion through a partnership with JUB Pacific.

The prospects of Coastal

Recently, Coastal Group diversified its earnings portfolio in Mexico by venturing into gas sweetening processing plant project. Natural gas burns fewer emissions of air pollutants and carbon dioxide compared to other types of fossils to produce equal amount of energy. Globally, the demand trend for natural gas is expected to increase mainly due to the development of industries and growth in electricity demand using natural gas as power generation source. In view of the above, the Management is optimistic with our JUGCSU business.

A large number of vessels which have been laid up during the downturn may not return to service due to high reactivation costs and the reluctance of oil companies to contract vessels which have been out of service for longer period. These circumstances may reduce some of the supply overhang and provide a good opportunity for our shipbuilding division in the next few years. While waiting for the recovery of OSV market, Coastal Group has embarked into liftboat chartering with a long term plan to tap into the wind farm renewable energy sector which is currently the fastest growing energy sources in the world.

From the above statement analysis, I VIEW  POSITIVELY and optimistic on Coastal prospects and believe it's will make a good result in the coming quarters.

The above statement mention is author own view and opinion, no buy and sell recomendation given, if you wish to seek an advice about investing and related stock market ideas and analysis, please find the licensed financial institutional and analysis which is registered on bursa malaysia. Thank you.