COASTAL: Investment Bank Affirms “Buy” Rating Amid Project Timeline Revision
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
An investment bank has maintained its “Buy” recommendation and target price for a key energy contractor, despite an extension in the timeline for a crucial project’s trust account establishment. The firm views the adjustment as a procedural step with no material risk to the contract’s fundamentals or the company’s future earnings trajectory.
Project Timeline Adjustment
The development pertains to the engineering, procurement, and construction (EPC) contract for a gas sweetening plant, a separation plant, and related infrastructure at the Ixachi Field in Mexico. The company’s Mexican joint venture, Coastoil Dynamic S.A. de C.V. (CODY), along with its consortium partners and Petroleos Mexicanos (PEMEX), has executed an addendum. This revises the timeframe for PEMEX to establish a necessary trust account, extending it from 30 to 55 business days from the signing date, now due by March 12, 2026. Importantly, the core aspects of the contract, including the scope of works, structure, and payment mechanism, remain unchanged.
Analyst’s Perspective
Analysts at TA Securities interpret this trust account extension as procedural in nature, rather than indicative of elevated contract risk. While the effective date, and thus revenue recognition, may be marginally deferred, the investment bank does not view this as a structural setback. This perspective is reinforced by the fact that the second Papan plant timeline remains on track, with its first gas target still firmly set for the fourth quarter of 2026, thereby preserving overall execution momentum.
Financial Outlook and Strategic Importance
The investment bank has opted to leave its financial forecasts unchanged, citing no revisions to the contract’s value, scope, or tenure. It anticipates that earnings contribution from the project will remain intact despite the deferred effective date, and foresees no material impact on FY26F-FY27F earnings at this stage. The Ixachi Field project continues to be a cornerstone of the company’s overseas growth strategy, strengthening its long-term positioning with Petroleos Mexicanos (PEMEX).
Valuation and Recommendation
TA Securities maintains its “Buy” recommendation for the company, with a target price of RM0.25, representing an upside of 25.0% from the last traded price of RM0.20. The reiterated rating underscores confidence in the company’s operational execution and the underlying fundamentals of its key projects, despite the recent procedural timeline adjustment.
