Coastal well positioned to deliver long-term value
While short-term earnings for the integrated oil and gas services and energy infrastructure solutions provider are being weighed down by timing-related factors, the group's medium-term prospects remain intact.
The group's robust financial footing stems from major contributions from its Mexican joint venture Coastoil Dynamic SA De CV (Cody), and proceeds from the sale of two offshore support vessels (OSVs).
As a result, Coastal now holds approximately RM1bil in cash and cash equivalents, the majority of which is currently placed in short-term investments such as money market funds, said TA Research.
This liquidity, the research house noted, 'provides room to pursue key growth initiatives'.
Coastal's shipbuilding division is expected to drive earnings recovery, TA Research said.
Three utility support vessels are currently under construction, with two scheduled for delivery in the second half of this financial year (2H25), and one in 1H26.
The company also has three high-end OSVs in the pipeline, with staggered deliveries planned from 1H26 through 1H27.
Beyond its core business, Coastal is exploring diversification into high-end hospitality, which would further boost its prospects.
TA Research noted that the group is in discussions with luxury hotel operators to manage a resort development on Pulau Mabul.
'The capital expenditure for the first phase is estimated to be RM85mil and the room rate is expected to be more than US$500 per person per night,' the research house said.
Given the project's timeline of one to two years and the fact that discussions are still ongoing, TA Research said it does not expect the hospitality segment to generate revenue until 2026.
Meanwhile, Coastal's near-term financial results reflect a lull in project deliveries.
For the first quarter ended March 31, the group reported core profit of RM17.7mil, which TA Research said was within its expectations at 22% of its full-year forecast, though it missed consensus forecasts at 15%.
'We anticipate earnings to grow from the shipbuilding division with two utility support vessels scheduled for delivery in 2H25,' the research house said.
Quarter-on-quarter, revenue fell 58.2% to RM16.5mil, due to weaker contributions from shipbuilding and ship repair, while pre-tax profit dropped by 84.9%.
Year-on-year, revenue declined by 7.1%, with pre-tax profit plunging 83.3% due to the absence of charter income from an OSV.
TA Research maintained its 'buy' recommendation on Coastal with a target price of RM2.04 per share, based on a sum-of-parts valuation.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Barnama
an hour ago
- Barnama
Bursa Malaysia Ends Higher, Tracking Most Regional Markets
By Zarul Effendi Razali KUALA LUMPUR, Aug 18 (Bernama) -- Bursa Malaysia closed higher today, tracking the mostly positive performance of regional markets, supported by continued buying in selected heavyweights, a dealer said. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 8.62 points, or 0.55 per cent, to close at 1,584.96 from Friday's close of 1,576.34. The benchmark index opened 1.92 points firmer at 1,578.26, and moved between 1,575.48 and 1,588.61 throughout the day. The broader market, however, was slightly negative, with decliners leading advancers 514 to 491, while 469 counters were unchanged, 1,112 untraded and six suspended. Turnover rose to 2.54 billion units worth RM2.72 billion from 2.01 billion units worth RM2.03 billion on Friday. Rakuten Trade Sdn Bhd vice-president of equity research Thong Pak Leng said the FBM KLCI resumes its uptrend after two days of profit-taking as sentiment continues to improve. "Key regional indices were higher, buoyed by signs of progress in US-Russia talks over a potential ceasefire in Ukraine. Meanwhile, investors are closely watching for any signals on US interest rates from the Federal Reserve's annual retreat in Jackson Hole. 'On the domestic front, we remain optimistic on the positive developments in improving geopolitical conditions. The benchmark index is currently retesting the 1,585 resistance level and closed the session at 1,584.96, just below this immediate threshold,' he told Bernama.
Barnama
an hour ago
- Barnama
Rubber Market Ends Lower Amid Mixed Regional Rubber Market Performances
WORLD By Engku Shariful Azni Engku Ab Latif KUALA LUMPUR, Aug 18 (Bernama) -- The Malaysian rubber market closed lower on Monday, weighed down by mixed performances in the regional rubber futures markets, a dealer said. She said market sentiment was influenced by ongoing uncertainties surrounding the US economic outlook and the escalating Middle East crisis. "Nevertheless, further losses were limited by rising crude oil prices amid optimism over the US-Russia dialogue on a Ukraine ceasefire," she told Bernama today. She said Thailand's meteorological agency warned of heavy rains and accumulations that may cause flash floods and overflows from Aug 17-18 and Aug 22-23. At 3 pm, the Malaysian Rubber Board reported that the price of Standard Malaysian Rubber (SMR) 20 was down 7.5 sen to 729 sen per kilogramme (kg), while latex in bulk slid 3.5 sen to 568.50 sen per kg. -- BERNAMA
The Star
3 hours ago
- The Star
Indonesia's 2026 budget ripe with politics, thinner on strategy
JAKARTA: A lack of satisfying answers on how to reach growth goals set forth in the freshly unveiled 2026 state budget has led economists to conclude that the fiscal document is based more on political ambition rather than on technocratic calculation. Centre of Economic and Law Studies (CELIOS) executive director Bhima Yudhistira Adhinegara told The Jakarta Post on Saturday (Aug 16) that the targets set in the budget plan 'overshoot and require strenuous effort' to attain. 'It's ripe with political aspects to fulfill the populist programmes as opposed to being based on technocratic calculation, which includes fiscal discipline,' said Bhima. One of the targets highlighted by Bhima was for gross domestic product (GDP) growth to accelerate to 5.4 per cent, which he doubted the country would attain due to external pressure, sluggish global commodity markets and a lack of domestic driving forces. The last time Indonesia registered such strong GDP growth in a full year was in 2013 with 5.56 per cent, and it has mostly hovered around the five percent mark since. In 2022, a full-year growth rate of 5.31 percent did get close to next year's target, but that was largely attributed to a base effect, because it followed unusually slow growth in 2021, when the national economy was still suffering from the coronavirus pandemic shock. The government's 5.2 per cent GDP growth target for 2025 already assumes a significant speed-up in the second half, after year-on-year (yoy) rates of 4.87 per cent and 5.12 per cent, respectively, in quarters one and two, yet even from that level another big step-up would be needed to reach 5.6 per cent next year. Institute for Development of Economics and Finance (Indef) economist Eko Listiyanto, likewise, said the budget draft was 'a political document' that served the purpose of exerting optimism 'by setting higher targets'; it was not solely technocratic in nature. He said in a press briefing on Saturday that attaining the growth target 'is not easy, but the opportunity is still there', before mentioning a range of thorough overhauls that could place the target within reach. Priority would have to be given to creating jobs and 'fixing' people's spending power that have been weakening over the past years, said Eko. Moreover, the government would need to 'optimise' the export market, encourage investment and make the bureaucracy more effective. Asked about the course to reach the growth target in a press conference on Friday, Finance Minister Sri Mulyani Indrawati answered: 'We will look for sources of economic growth.' She only mentioned 'improving the business climate' to attract more investment as one of the sources and suggested pursuing that effort by rewarding regional governments with incentives if they made their jurisdiction more attractive for investors. There was a similar lack of illustrated strategy regarding the ambitious state revenue target, which has been set at Rp 3.14 quadrillion (US$194 billion), or 9.8 per cent more than the latest projection of Rp 2.86 quadrillion for this year. To realise that income next year, Sri Mulyani revealed that tax revenue would need to grow by 13.5 per cent yoy, which was 'rather high and ambitious'. Nevertheless, she insisted the target was achievable, given the budget's GDP growth and inflation assumptions of 5.4 and 2.5 per cent, respectively, a combination that would bring the tax buoyancy to between seven to nine per cent. Tax buoyancy is an indicator that connects the GDP growth with tax revenue that arrives at a conclusion whether the tax is buoyant or not. Tax is considered buoyant when the revenue increases proportionately to or more than the economic growth. With the seven to nine per cent buoyancy, Sri Mulyani said the government's 'extra effort' could be focused on pursuing another five per cent, which could be achieved through various means: 'We still see room for improvement.' The senior economist stressed that there would be no regulatory changes to pursue the ambitious tax collection. The path the government planned to pursue instead was 'a focus on internal reform', such as by fixing flaws in the Coretax system. In search of increased revenue, the government is also eying the shadow economy and illegal activity overlooked in tax collection in the past. President Prabowo Subianto said in a state budget address on Friday that the government had taken control of 3.1 million hectares of illegal oil palm plantations. Neither the President nor Sri Mulyani explained how this would reshape the revenue collection, but the latter said without elaborating that it 'created a new database'. Syafruddin Karimi, an economist from Andalas University, wrote in an analysis on Saturday that 'an excessively high tax target is a double-edged sword' that reflected the government's optimism in the national tax base but might result in spending cuts should realisation fall short of expectations. 'History reveals that overestimation of tax [income] frequently plays out with realisation falling short. Under those circumstances, the state budget no longer is a countercyclical tool but merely an administrative instrument that follows the economic tide,' said Syafruddin. - The Jakarta Post/ANN
