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Tuesday, August 13, 2013

Coastal contract's share price rises on RM170 MLN vessel order


KUALA LUMPUR, (Aug 13): Coastal Contract Bhd's share price rose today on
the announcement that it had secured a RM170 million order for an anchor
handling tug supply vessel and a subsea support /maintenance vessel

As at 11 am, the company's share price gained six sen or 2.2 per cent,
to RM2.73, with 793,800 shares changing hands.

Kenanga Research in research note today said the new contracts had
boosted Coastal Contract's outstanding order book to approximately RM1.2
billion, with year-to-date vessel sales at RM1 billion.

This surpasses the RM698 million recorded last year and the 2008 peak of
RM919.2 million.

It also said Coastal Contract's net profit margin was guided to be
around 15-25 per cent from financial year 2012 onwards due to the
normalisation of market conditions for the shipbuilding industry in the

"Coastal Contract's maiden jack-up rig is due to be delivered in
mid-2014, and will spearhead its move into asset-ownership, versus the
previous build-and-sell model," it added.

Kenanga Research said according to the research house channel checks,
there are more than 40 jack-up rig contracts in South East Asia, that
are expiring from the middle of this year to 2015.

"Given the abundant opportunities, it is likely that Coastal Contract
will be able to secure more contracts," it added.

Meanwhile, RHB Research in a separate note said Coastal Contract could
easily secure at least RM300 million worth of orders this year to beat
its total outstanding order book forecast of RM1.5 billion.

"This is due to the strengthening demand for offshore support vessels,
supported by robust global oil and gas activities and oil price above
US$100 per barrel currently. We see room for an earnings upgrade moving
into 2012," it added.

Kenanga Research has maintained an "outperform" valuation on Coastal
Contract with an unchanged target price of RM3.87, while RHB Research
retained a "buy" call on the company and kept its fair value at RM3.

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