PETALING JAYA: Coastal Contracts Bhd
’s earnings are expected to be underpinned by the upcoming capacity expansion at its Papan gas processing plant in Mexico and strong momentum in its shipbuilding division, says TA Research.
Coastal has been advancing its gas processing operations by expanding the Papan plant’s capacity and also, modifying the Perdiz plant, both of which serve the Mexican oil and gas sector to incorporate liquified petroleum gas recovery capabilities.
TA Research said in a report the expansion of the Papan plant, operated in partnership with Mexico-based Pemex, is expected to increase capacity by at least 150 million standard cubic feet per day (mmscfd), with commissioning targeted by the end of this year.
Although the group saw temporary declines due to unplanned outages in the first quarter of this year (1Q25) , operations have since stabilised with processing volumes fully recovering to optimal level of 345mmscfd.
Now, both plants are operating at full capacity, with the Papan plant running at 345mmscfd, while the Perdiz plant has reached 185mmscfd.
“The upcoming expansion is expected to further strengthen Coastal’s processing capabilities and support Pemex’s broader gas infrastructure strategy,” TA Research said.
On the shipbuilding front, the research house said that Coastal’s expanding order book will continue to support the shipbuilding division towards growth.
Coastal’s current pipeline includes three utility support vessels and three high-end offshore support vessels.
These are scheduled for delivery between the second half of this year (2H25) and 1H27.
TA Research said the group is projecting up to RM600mil in vessel sales during this period, aligning with its long-term strategy to scale operations and improve earnings visibility.
Separately, Coastal’s TC7 liftboat under Coastal’s vessel chartering division will continue to remain as a key contributor to the group.
The asset is said to enter the final extension phase of its contract structure, set to end in September.
Since securing a 35% increase in charter rates in September 2022, TC7 had contributed meaningfully to the group’s earnings.
“With a strong operational track record and potential for redeployment in sectors such as offshore wind, TC7 remains a strategic asset, though longer-term contract visibility beyond the current extension remains an area to monitor,” said TA Research.
The research house, which made no changes to its earnings forecast has maintained a “buy” call on Coastal with a target price of RM2.04.
It added Coastal is expected to secure contract extension for the jack-up gas compression service unit and capacity expansion contract for the Papan plant, thus providing additional recurring income to the group.
