COCO’s shipbuilding division has secured orders totalling MYR318m for six oil & gas (O&G) offshore support vessels (OSVs). As this is within our estimates, we keep our FY13F-14F EPS forecast unchanged and retain our NEUTRAL call on the stock, with a MYR3.00 FV. Any rerating catalyst will depend on COCO’s success in securing its maiden jack-up rig contract.

- Secures MYR318m orders. COCO’s wholly owned subsidiaries, Coastal Offshore (Labuan) Pte Ltd and Thaumas Marine Ltd, have collectively secured contracts for the sale of six OSVs, which comprise: i)one subsea support maintenance vessel (SSMV), ii) one platform supply vessel (PSV), and iii) four anchor handling tug supply (AHTS) vessels for an aggregate value of around MYR318m. Three of these vessels will be sold to new clients and the rest to a repeat customer. We conservatively estimate that half of these vessels will be delivered in FY13, with the rest in FY14.

- Orderbook currently worth MYR1.28bn. The new vessel orders have lifted its YTD sales orders to MYR1.35bn and will last until 2014. As its current orderbook of MYR1.29bn is within our estimate of MYR1.5bn (FY13: MYR650m; FY14: MYR850m), we keep our FY13 and FY14 earnings estimates unchanged.

- Waiting for a re-rating catalyst. Management has yet to secure a contract for its USD200m (MYR641m) jack-up rig slated for delivery in 2H14. This deprives the stock of the premium that other offshore asset owners are currently trading at. Management has indicated the possibility of selling the rig should it fail to secure a contract. Given a lack of clear indication on this matter, our FY14 earnings estimate does not take either outcome into account.

- Maintaining NEUTRAL, with MYR3.00 FV. Our unchanged FV of MYR3.00 is based on 10x FY14F P/E. Securing a contract for its jack-up rig may easily re-rate COCO to 13-14x forward earnings, in line with those of other offshore asset owners.

Recommendation Chart

Source: RHB