Coastal Contracts 1Q15 results in line

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KUCHING: Coastal Contracts (Coastal) booked a net profit of RM66 million for the first quarter of 2015 (1Q15), in line at 33 per cent of AllianceDBS Research Sdn Bhd (AllianceDBS Research) and consensus estimates as earnings will normalise in the coming quarters.

The group’s earnings are typically lumpy from quarter-to-quarter, depending on the vessel delivery schedule.

“In 1Q15, the group delivered five high-specification vessels compared to only two in 4Q14 and three in 1Q14,” AllianceDBS Research divulged in its report yesterday.

This was on the back of securing RM2.4 billion orderbook, it said, which underpins forward earnings for the Sabah-based marine services and products provider.

“The orderbook comprises RM1.1 billion worth of vessel orders and a RM1.3 billion long term contract to supply Pemex with a gas compression unit which starts in the second half of the year.

“On top of this, Coastal is slated to sell their first jack-up rig by 3Q15 for RM807 million.”

As mentioned previously, AllianceDBS Research believed profit from this sale would be negligible for the group.

However, should Coastal Contracts secore a contract for a second jack-up rig, it would be a game-changer.

“If the group secures a contract for their 2nd jack-up drilling rig (which will be delivered end-2015), there will be upside to our forecast earnings.

“Given the tough drilling market, we have excluded potential earnings from the second rig as the group might also sell the rig if there is a buyer,” it added.

“We have a buy recommendation for Coastal Contracts with a RM3.35 price target.”