Fair Value: RM 2.57

Current Price: RM 2.22

Recommendation: BUY

On the 24th of Aug, the company announced its 2nd Quarter report for Financial Year 2010. Profit for 2Q10 has increased 11.47% compared to the 1Q10. However, the 2Q10's revenue continue to be in the downtrend since 1Q10. I'm maintaining a cautious outlook on the company's profit due to the slow global economic recovery. Therefore, I'm maintaining the Fair Value at RM2.57. As the current market price is below the Fair Value, I'm maintaining a Buy recommendation for the long term.

Refer to previous write-up here for more info on this company

Fair Value: RM 2.57

Current Price: RM 2.31

Recommendation: BUY

On the 25th May, the company announced its 1st Quarter report for Financial Year 2010. Profit for 1Q10 has increased 55.97% compared to the 1Q09. However, the 1Q10's profit has decreased 19.85% compared to 4Q09. Therefore, I'm revising the Fair Value to RM2.57 from RM2.97 in anticipation of a downtrend in the next 3 quarters' earnings.

Refer to previous write-up here for more info on this company

Fair Value: RM 2.97

Current Price: RM 2.18

Recommendation: BUY

Yesterday, the company announced its 4th Quarter report. Its yearly profit has increased 68.14%. Thus, I'm revising my Fair Value from RM1.99 to RM2.97 and my recommendation from Hold to Buy.

Refer to previous write-up here for more info on this company

Fair Value: RM 1.99

Current Price: RM 2.11

Recommendation: HOLD

As the current market is above my Fair Value, I'm revising my recommendation from Buy to Hold.

Refer to previous write-up here for more info on this company.

Fair Value: RM 1.99

Current Price: RM 1.95

Recommendation: BUY

The recent quarterly profit which was announced on the 23rd November 2009 showed an improvement to the overall current EPS. Thus, I raised the Fair Value to RM 1.99 from its previous RM 1.79 and give it a BUY rating.

Refer to previous write-up here for more info on this company.

Fair Value: RM 1.79

Current Price: RM 1.90

Recommendation: HOLD

Refer to previous write-up here for more info on this company.

Fair Value: RM 1.79

Current Price: RM 1.71

Recommendation: BUY

As the current price is now below the Fair Value, it is a good buy now. For those of you who have bought this share based on my miscalculation of the previous Fair Value (as stated here), now is the good opportunity for you to buy some more of this share to Average Down your cost per share.

Fair Value: RM 1.79

Current Price: RM 1.84

Recommendation: HOLD

I just came to realise recently that I've miscalculated the Fair Value for Coastal Contracts, which should be RM 1.79 and not RM 2.12. This is because of my miscalculation of the current EPS which is RM 0.2748 now.

I'm sorry for my mistake. For those who have bought this share based on my previous recommendation, I would recommend that you continue to hold it because I expect this share to move up its price to at least RM 2.60 by end of this year or next year. If you have extra cash, you may also want to buy some more of this share below RM1.79 to average down your cost.

Refer to previous write-up here for more info about this company. 

(6 years Historical Chart)


Company Background

Coastal Group, founded in 1978, is a Sandakan-based marine incorporation that provides marine products and services to the shipping, oil and gas and commodities industries. The Group main services include build, charter, repair, maintain and trade of marine vessels, ranging from tug boats, oil barges, dumb barges, landing crafts to offshore supporting vessels and more.

The Group operates shipyards that cover more than 90 acres of land. With the aim for high quality, its shipyards are well equipped with advanced technologies, operated by skilled personnel.

The Group has a portfolio of local and worldwide customers from many different backgrounds. Its local customers include logistic service providers, navy, shipping agents and commodities providers. Its worldwide customers come from shipping industries and offshore oil and gas industries specialised in diving support, oil and gas production, dredging work, marine construction and pipelaying.

Fundamentals

ROE: 31.38%

Average EPS Growth Rate: 46.2%

D/E: 0.29

Gross Profit Margin: 31.36%

Average P/E: 7.3

Dividend Yield: 2%

Fair Value: RM 2.12

Current Price: RM 1.96

Recommendation: BUY


SWOT Analysis

Strengths
The Group is one of the leading premier vessel fabricators in Malaysia. Also, it is an established vessel chartering services provider in Southeast Asia, with long term customers chartering its vessels to carry coals, iron ore, metal scraps, stones, crude oil, etc. It also offers maintenance, repair and overhaul services to the Royal Navy, Marine Police and Malaysian Maritime Enforcement Agent, thus giving it a steady stream of income from this segment. For the fourth consecutive year, Coastal Contracts was awarded Forbes' "Asia's 200 Best Under a Billion" in 2009.

Weaknesses
Sometimes, customers can cancel their order for new ships, especially during global economy slow down. However, currently no cancellation of orders is significantly affecting the financial performance of Coastal Contracts.

Opportunities
As there are not many shipbuilding and marine transportation players in this region, there will continue to be demand for its services, especially from Indonesia.

Threats
The Group's main local competitor are Oceanic Engineering Sdn Bhd (shipbuilding), public listed Boustead Heavy Industries Corporation Bhd (formerly PSC Industries Bhd) (heavy engineering and construction, shipbuilding and ship repair, commissioning of offshore installations for the oil and gas industries) and Weidan Marine Services Sdn Bhd (shipbuilding).

CONCLUSION
Coastal Contracts is still experiencing double-digit earnings growth. As the current price is below the Fair Value, I give it a Buy rating.