Below  estimates.  Coastal  reported  FY12  net  profit  that  was  below  our  and  consensus estimates, accounting  for  only  90.2%  and 87.5%  of  the  respective  forecasts.  Although its revenue  increased  6.3%  y-o-y  and  9.3%  q-o-q,  its  net  profit  plunged  by  37.8%  y-o-y  and 7.0%  q-o-q  due  to  narrower  margins  derived  from  the  sale  of  vessels.  Despite  delivering only four vessels in 4QFY12 compared to seven vessels in 3QFY12, its revenue increased from  the  sale  of  high-end  offshore  support  vessels  (OSVs)  in  4QFY12,  which  command higher prices and generate more revenue.  

A  second  interim  dividend  of  2.8  sen.  This  represents  a  yield  of  2.8%  and  a  dividend payout  ratio  of  22.8%  based  on  its  FY12  numbers.  We  tweak  our  dividend  payout downwards from 6.5 sen to 6.0 sen as we adjust our FY13-FY14 payout ratios to be in line with this year's payout ratio (FY12: 22.8%, FY13: 22.6%, FY14: 22.3%).

Lowering  FY13  estimates.  Due  to  the  lack  of  catalysts  in  the  near  term,  we  lower  our FY13 earnings forecast by 21.8%. While the OSV market is on a gradual road to recovery, orders  will  continue  to  be  slow  in  FY13.  Our  channel  checks  suggest  that  the  current demand  for  OSVs  could  be  met  by  the  current  supply  of  vessels  in  the  market. We  also take the opportunity to introduce our FY14 estimates.

Downgrade to NEUTRAL. Given that the prospects of the company remains muted in the near term, we are downgrading the stock from BUY to NEUTRAL, in line with our earnings downgrade.  Our  FV  is  reduced  from  RM2.44  to  RM1.90  (pegged  to  7x  of  its  12-month forward earnings).

Source: OSK