PETALING JAYA: Coastal Contracts Bhd
is poised for strong medium-term earnings growth, driven by an expanding operations and maintenance (O&M) portfolio and a growing engineering, procurement, and construction (EPC) pipeline, says TA Research.
Following the group’s analyst briefing, the research house said it came away with increased confidence in its earnings trajectory across the next three years. As a result, it has raised its earnings estimates for the financial year 2026 (FY26), FY27 and FY28 by 77%, 110.8% and 81.9%, respectively.
The revision is said to reflect updated management guidance on EPC and O&M margins across the company’s second Perdiz plant, second Papan plant, and separation plant projects.
It highlighted multiple key growth catalysts, including the successful commissioning of the second Perdiz plant, which recently commenced operations in May 2026. The O&M contract was structured based on a conservative throughput assumption of 160 million standard cu ft per day (mmscfd), compared to the plant’s maximum capacity of about 200 mmscfd.
“Given the strong production outlook of the Ixachi field, management expects the facility to operate beyond its initial three-year O&M tenure and potentially continue generating recurring income for up to 10 years, subject to contract renewal,” TA Research said.
While the final EPC margins for the permanent infrastructure (PI) package and overall second Perdiz project have yet to be disclosed, Coastal Contracts management indicated that realised profitability could exceed its current 20% EPC margin assumption, implying potential upside to earnings forecasts.
Meanwhile, the group’s second Papan plant became effective in May 2026, and is on track to achieve first gas and commercial operations for the 150 mmscfd facility by the first quarter of FY27 (1Q27).
“Upon completion, Coastal Contracts will own and operate the plant under a nearly nine-year O&M contract, with management guiding for net margins around 20% to 25%,” the research house said.
Additionally, the group has won a RM700mil EPC contract for the associated PI works, with revenue recognition expected in 1Q27 upon completion and acceptance by Pemex.
Furthermore, its RM1.9bil separation plant EPC contract is expected to receive its first work order in 4Q26. “We expect revenue and earnings recognition to be spread across FY27 to FY28, providing a meaningful earnings growth driver over the medium term,” TA Research said.
Beyond this, it said the group’s vessel construction programme continues to provide earnings support over the next several quarters.
The research house has reiterated its “buy” rating on the stock, with a raised target price of RM2.12 per share from RM2.01 previously.
