COCO  has  secured orders for  three  oil & gas (O&G)  offshore support vessels  (OSVs)  worth  a  combined  MYR148m,  lifting  its  orderbook  to MYR1.34bn.  We  keep  our  FY13/14  earnings  estimates  unchanged.  We believe COCO is likely to  secure  its first rig chartering  job  as  Asean’s offshore O&G activities  remain buoyant. If  the contract  materialises,  it could provide more earnings upside. Maintain BUY and MYR3.77 FV.

• Secures  MYR148m  in  orders.  COCO’s  wholly-owned  subsidiaries, Coastal  Marine  Pte  Ltd  and  Thaumas  Marine  Ltd,  have  collectively secured  contracts  for  the  sale  of  three  OSVs,  which  comprise:  i)  one subsea support maintenance vessel (SSMV), and ii) two low-end vessels for  a combined  MYR148m. Two  of the vessels will be sold to an existing client  and the  other  to a  new  customer.  We conservatively estimate that one of these vessels will be delivered in FY13  and  the rest in  FY14,  as the company normally builds vessels before receiving firm orders.
• Current orderbook  worth MYR1.34bn.  Management  revealed  that  the new  vessel  orders  have  lifted  its  YTD  sales  orders  to  MYR1.5bn.  Its current  orderbook,  now  valued  at  MYR1.34bn,  is  expected  to  last  the company till FY14.
• Profit  margins  to  improve  further  from  FY14  onwards.  COCO’s 9MFY13  results  improved  largely  due  to  the  supply  of  technologicallyadvanced  vessels  that  fetched higher profit margins.  Going forward,  we expect  margins  to  remain  strong  as  the  bulk  of  its  existing  orderbook comprise of more advanced vessels.
• Maintain BUY,  MYR3.77  FV.  We keep our FY13/14 earnings estimates intact  while  the  company’s  new  drilling  segment  awaits  its  first  rig chartering  contract.  Management  has  guided  that  COCO  will  take delivery  of  its  first  drilling  rig  in  2HFY14,  and  is  currently  actively negotiating  on  a  potential  contract.  Maintain BUY on the stock, with  our MYR3.77  FV  pegged to  a target FY14 P/E of 12x, in line with those of small- to mid-cap O&G asset owners.

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Source: RHB