Coastal  Contract  (COCO)'s  shipbuilding  division  has  secured  a MYR170m order for an anchor handling tug supply (AHTS) vessel and a subsea  support/maintenance  vessel.  The  vessels  are  scheduled  for delivery  in  2014.  We  keep  our  FY13-FY14F  EPS  estimates  unchanged and  retain  our  MYR3.00  FV.  Given  the  potential  12%  upside  to  our  fair value, we retain our BUY rating on the stock.

- Secures  MYR170m  orders.  Coastal's  wholly-owned  subsidiary, Thaumas  Marine,  has secured  a  MYR170m  order  for a  newbuild  AHTS and  a  subsea  support  vessel  from  an  unnamed  client.  We  expect  the vessels to be delivered in 2014.  

- MYR1.2bn-strong  net  orderbook.  The  latest  contract  lifted  the company's YTD new orders to  MYR1bn, which  will last till 2014. As the total  outstanding  orderbook  of  MYR1.2bn  falls  within  our  MYR1.5bn forecast  (FY13:  MYR650m,  FY14:  MYR850m),  we  leave  our  FY13-14F EPS  forecasts  unchanged.  We  expect  AHTS  vessels  to  make  up  the bulk of the company’s new orders in the near term.

- Shipbuilding  near-term  prospects  encouraging.  We  believe  Coastal could easily secure at least MYR300m worth of orders this year to beat our  forecast.  This  is  due  to  the  strengthening  demand  for  offshore support  vessels,  supported  by  robust  global  oil  &  gas  activities  and  oil price  of  above  USD100  per  barrel  currently.  We  see  room  for  an earnings upgrade moving into 2014.  

- BUY, with MYR3.00 FV. Given the potential 12% upside to our FV, we retain our BUY rating on the stock, with an unchanged FV of MYR3.00. Our  FV  is  derived  by  applying  a  10x  P/E  multiple  on  Coastal's  FY14 EPS,  which  is  at  a  30%  discount  to  the  oil  &  gas  sector  and  a  25% premium to its historical average 8x P/E. We believe the premium to its historical  average  is  fair  compared  to  its  peak  19x  P/E,  given  that  the company  may  potentially  own  a  premium  jack-up  rig  in  2H14,  although there is still a chance that Management may sell it off if  the company is unable to secure a contract.

Source: RHB