Coastal Contract’s (COCO)  1QFY13  net  profit  of  MYR31.1m  was  in  line with our and consensus full year estimates. We make no changes to our earnings forecasts and retain our NEUTRAL call on the stock given the near term cloudy outlook for shipbuilders. We raise our FV to MYR2.33, from  MYR2.05  previously,  as  we  peg  the  stock  to  8x  FY14  EPS (previously 7x FY14 EPS) since there is ample room for a re-rating once it secures more orders later in the year.

- In  line.  COCO’s 1QFY13 net profit of MYR31.1m  (+9.6%  q-o-q,  +1.1% y-o-y) was in line, accounting for 24.3% of our and 23.1% of consensus full  year  estimates.  Despite  its  profitability  improving  during  the  quarter, its revenue of MYR168.9m was weaker by 12.8% q-o-q and 27.5% y-o-y as  it  delivered  only  four  units  of  vessels,  which  were  lower  in  value,  vs four units of vessels in 4QFY12 and seven in 1QFY12.

- Balance sheet remains intact. As at end-1QFY13, the company had a net  cash  position  of  MYR128.8m,  which  is  equivalent  to  29.4  sen  per share.  

- Near  term  outlook  less  promising.  We  still  believe  that  the  company will  eventually  benefit  from  the  growing  demand  for  offshore  support vessels  (OSVs),  although  this  may  only  kick  in  later  in  2H13  or  1H14. Moving  forward,  the  company  will  focus  on  building  and  selling  more technologically-advanced assets to enhance its earnings.

- Maintain  NEUTRAL.  We  make  no  changes  to  our  earnings  estimates and retain our NEUTRAL recommendation on the stock given the cloudy outlook  for  shipbuilders  in  the  near  term.  We  raise  our  FV  to  MYR2.33 from MYR2.05 previously, as we now peg the stock to 8x FY14 EPS (vs 7x FY14 EPS previously) as there is ample room for a re-rating once the company secures more orders later in the year.

Source: RHB