Coastal Contracts; Buy; RM2.84
Price Target: RM2.70; COCO MK

Coastal Contracts Bhd announced that it had secured RM425m in contracts for the sale of five anchor handling tug supply (AHTS), one accommodation work barge and one 85m subsea support/maintenance vessel. The vessel buyers for five ships were new and noted to hail from Southeast Asia and Africa, while two vessels were sold to returning customers. With this, Coastal Contract’s outstanding order book has reached c.RM1bn as at 26 Jul 2013, which would sustain revenues till 2014.

The contracts now bring YTD order wins to RM859m, slightly above our RM850m assumption. We think operating margins should still be in the c.15-20% range, and would be fueled by construction of highertier deepwater vessels though still at smaller engine ranges. Prospects for Coastal are bright, given steady improvement in OSV vessel demand/supply dynamics as well as acquisition of a jack-up rig by 2Q14. We maintain our forecasts for now, with our price target under review.

Source: HwangDBS Research - 29 Jul 2013