Coastal has won its maiden contracts for 2013 worth a combined MYR434m. While this is good news, we leave our earnings estimates unchanged as we have incorporated this value into our forecasts. In anticipation of slower than expected orders this year, we remain NEUTRAL on the stock. However, we nudge up our FV to MYR2.05 as we roll over our valuations to 7x FY14 EPS (previously 7x 12-month forward earnings).

- Receives order for 7 OSVs, 2 oil barges. Coastal Contracts (COCO) announced that its wholly-owned subsidiaries, Coastal Offshore (Labuan) Pte Ltd and Thaumas Marine Ltd, have collectively secured contracts for seven offshore support vessels (OSVs) and two oil barges worth approximately MYR434m. These vessels, scheduled to be delivered in
2013 and 2014, are expected to contribute positively to the company’s profits in FY13 and FY14.

- Mixed bag of clients. Among the seven OSVs sold, four platform supply vessels (PSV) were for new customers from the Netherlands and West Africa, while one utility support vessel (USV) and one DP2-enabled remote operated vehicle (ROV) support/maintenance vessel were sold to new customers from Malaysia and Italy. Meanwhile, the order for one anchor handling tug supply (AHTS) is from a new Norway-based customer. All the vessels ordered are scheduled for delivery this year and in 2014.

- No impact on our earnings estimate. The current contract wins make up 50% of our current assumption since only some RM200m-RM250m of the total would be recognized this year. Note that our financial model assumes RM500m worth of new contracts to be recognized in FY13.

- Maintain NEUTRAL. As there are no changes to our earnings estimates, we are retaining our NEUTRAL recommendation on the stock given the weak outlook for shipbuilders in the near term. We nudge up our FV to MYR2.05 from MYR1.90 as we roll over our valuations to 7x FY14 EPS, from 7x 12-month forward earnings previously.)

Source: RHB