The RM141 million vessel sales contracts bagged by Coastal Group is a positive turn for the shipbuilder, says HwangDBS.
It secured the contracts in the midst of a drought in orders during the first half of this year following increasingly negative sentiment in global markets and depressing oil and gas investments, it said.
In its research note, HwangDBS however said net margins on vessels would likely hover between 15 per cent and and 20 per cent, given a persistent buyer's market.
"We think orders will continue to trickle in, underpinned by demand for replacement of aging offshore support vessels and strong investment support from Petronas," it said.
The research house said Coastal still had a solid net cash position ensuring minimal debt issues, and was in the midst of moving up the value chain to build higher margin vessels -- subsea vessels worth US$100 million.
Accordingly, it maintained a 'Buy' call for the company's shares at a price target of RM2.35.
Coastal announced Monday that it secured RM141 million worth of vessel sales contracts comprising one 300 men accommodation work barge, one anchor handling tug supply (AHTS) and two tug boats.
Except for the AHTS, which is for a repeat customer, the rest of the vessels are being sold to new customers from Singapore.
"This brings year to date order wins to RM587 million and an accompanying outstanding order book of RM711 million, which will sustain earnings till 2013," said HwangDBS.
The vessels are expected to be delivered this year and in 2013.
As at 10.00am, it shares stood at RM1.90, up six sen.
-- BERNAMA
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