KUALA LUMPUR (Feb 27): HwangDBS Vickers Research (HDBSVR) is maintaining its Buy recommendation on Coastal Contracts with a target price of RM3.25.
It said on Monday that the 4Q11 net profit shrunk 7% on-year but up 41% on-quarter due to higher sales of lower-end vessels, which fetch lower margins (24% EBIT margin vs 4Q10’s 27%). Revenue was 8% higher on higher vessel sales recorded (13 units versus seven units in 4Q10).
As for the FY11 earnings, they were in line with market expectations at RM191 million.
“Besides its RM610 million outstanding order book as at January 2012 (which will last till end-2012), we expect further upside from additional sales through its business model of building ahead of demand,” it said.
HDBSVR said further, demand for offshore support vessels (OSVs) should be sustainable through strong replacement demand, as indicated by the divergence in utilisation rates of old fleets compared to new fleets.
“We believe Petronas’ increase in investment in the region will also benefit Coastal, given its solid track record and ability to supply new vessels within short lead times,” it said.
