For 9M16, core net profit dropped by 9.9 per cent y-o-y to RM136.7 million from RM151.7 million previously due to lower number of vessels sold in the period under review, despite the doubling of its top line.
KUCHING: Coastal Contracts Bhd (Coastal) saw its 9M16 results below expectations with net profit of RM136.7 million making up 57.9 per cent and 64.9 per cent of Kenanga Investment Bank Bhd (Kenanga Research) and consensus full-year estimates, respectively.
This was after excluding an inventory write down of RM56.7 million, and a foreign exchange gain of RM44.5 million.
“The negative variation was mainly due to the imputation of earnings contribution from the jack-up gas compression unit with Mexico’s state-owned petroleum company, Pemex, in our forecast, which did not materialise.
“3Q16 net profit declined by 16.8 per cent year on year (y-o-y) to RM45.2 million from RM54.3 million in 3Q14 due to margins derived from different vessel sale mix, although revenue jumped 3.9 times arising from the sale of its first jack-up rig. Sequentially, 3Q16 net profit strengthened 58.3 per cent due to stronger revenue contribution from the first jack-up rig sale as well as possibly driven by the more favourable US dollar-ringgit trend.
For 9M16, however, core net profit dropped by 9.9 per cent y-o-y to RM136.7 million from RM151.7 million previously due to lower number of vessels sold (12 units in 9M16 versus 11 units in 9M14) in the period under review, despite the doubling of its top line.
Looking at its outlook ahead, Kenanga Research warned of slow vessel order replenishment amidst a delay by Coastal Contracts on its second jack-up rig to mid-2016, but with the possibility of it being delayed further.
At the moment, management is looking to either charter out or dispose the rig to reduce their risk exposure if no contract is secured.
“Excluding its 1st jack-up rig sale earlier and the RM1.3 billion gas rig contract, the group’s orderbook stands at RM1.3 billion providing earnings visibility until 2017 amid the current challenging market.
“However, we believe vessel order replenishment will continue to be slow, pressurising its shipbuilding earnings going forward.”
Maiden full-year contribution from the jack-up gas compression unit chartered to Pemex on long-term contract will be felt next year, thereby partially offsetting weakness in the shipbuilding segment.
“Moreover, Coastal Contracts could be securing more projects from Pemex if they are able to execute the first gas compression unit project successfully.”