Coastal’s outstanding order book of RM5.2bil as at Dec 31, 2022 (including extension) is set to provide the group with long-term earnings visibility.
PETALING JAYA: Coastal Contracts Bhd
’s growth prospects going forward will be supported by higher contributions from its gas processing and vessel chartering segments as well as joint ventures (JVs).
TA Research said the marine products and services provider’s nine-month financial year 2023 (9MFY23) core profit of RM263.7mil (increased by 197.7% year-on-year or y-o-y) was above both its (88%) expectations and consensus’ full-year forecasts.
“The earnings beat was mainly attributed to higher-than-expected contribution from JV as the Papan Plant continued to recognise greater milestone claims for completion and commenced operations.
“We understand the plant has achieved first gas in March 2023,” the research house said in a report.
Coastal holds 100% shares in JV company Coastoil Dynamic S.A.De C.V. (CDSA), which owns the Papan and Perdiz projects in Mexico.
TA Research said the transfer of JV partner Nuvoil group’s 50% stake in CDSA is expected to complete by the second half of 2023.
“For now, Coastal recognises 100% of CDSA’s profits as its JV profit. Upon completion of the share transfer, the accrued JV profit will be transferred back to Nuvoil.
“Note that the nine-month comparison may not be meaningful as the group applied an equity accounting method on CDSA in the third quarter of financial year 2022 (3Q22),” the research house said.
For 3Q23, Coastal’s revenue increased 3.5% y-o-y to RM55.7mil, underpinned by higher contribution from the gas processing segment, which grew by 4.4% y-o-y due to favourable foreign currency exchange, as well as its vessel chartering unit which expanded by 1.9% y-o-y.
“The results were also on the back of higher revenue, greater contribution from JV (up by 550.2% y-o-y) and improved interest income for its gas processing division, as well as lower overhead expenses for its vessel chartering segment; pre-tax profit more than tripled y-o-y to RM158.8mil,” TA Research said.
On the other hand, unfavourable foreign exchange translation for its gas processing segment and expiration of short-term charter contract for its vessel chartering division resulted in the decline in revenue for the quarter by 10.6% quarter-on-quarter (q-o-q).
“Nonetheless, higher contribution from JV (up by 73.4% q-o-q) and lower overhead expenses for the vessel chartering division led to a 5.2% q-o-q growth in pre-tax profit,” TA Research said.
Coastal’s outstanding order book of RM5.2bil as at Dec 31, 2022 (including extension) is set to provide the group with long-term earnings visibility.
Going forward, the research house said growing demand for natural gas as the world works towards net-zero emission by 2050 supports its sanguine outlook on Coastal’s gas processing division.
