COASTAL: Investment Bank Reaffirms BUY Rating Amid Strong Performance and Growth Prospects

Investment bank TA SECURITIES has maintained its “BUY” recommendation, following a robust financial performance that saw the company’s 9MFY25 core profit of RM56.7 million align with expectations. This figure represents 71% of both the investment bank’s and consensus full-year forecasts, with TA SECURITIES affirming a target price of RM2.04, reflecting a substantial upside from its last traded price of RM1.14.

Financial Performance Review

While overall performance met expectations, operational segments displayed mixed results. The Gas Processing division’s Profit Before Tax (PBT) saw a 21.0% quarter-on-quarter (QoQ) decline to RM9.5 million. This downturn was primarily attributed to non-recurring operating costs associated with a jack-up gas compression service unit.

The Vessel Chartering segment experienced a marginal 2.0% QoQ decrease in revenue, leading to a slight 2.6% dip in PBT to RM6.5 million. This was largely due to slightly fewer chartering days during the period.

The Shipbuilding and Shiprepair segment faced more significant challenges, with revenue dropping sharply to RM0.5 million from RM2.0 million in the preceding quarter. Consequently, a PBT of RM0.7 million in the prior quarter turned into a Loss Before Tax (LBT) of RM1.3 million, largely reflecting reduced ship repair activity.

In contrast, the Others Division, encompassing non-core operating activities, reported a positive PBT of RM7.1 million. This marked a significant turnaround from an LBT of RM34.8 million in 3QFY24. This improvement was largely driven by fair value gains and investment income, which offset the previous quarter’s losses from unrealized forex fluctuations on USD-denominated investments amid a strengthening Malaysian Ringgit.

Future Outlook and Strategic Initiatives

The company maintains a robust financial position, boasting approximately RM939.0 million in cash and cash equivalents, primarily held in short-term investments such as Money Market Funds. This strong liquidity provides significant flexibility to pursue key growth initiatives across its segments.

The shipbuilding division is poised for expansion, supported by a healthy order book. This includes three utility support vessels currently under construction, with two scheduled for delivery in the second half of FY25 and one in the first half of FY26. Additionally, three high-end Offshore Support Vessels (OSVs) are in the pipeline, with staggered deliveries planned between 1H26 and 1H27.

The company is also actively exploring opportunities in the hospitality sector, engaging in discussions with luxury hotel operators for the management of its Pulau Mabul resort. Phase I of this project is estimated to cost around RM85 million, with contributions from the hospitality segment anticipated from FY26 onwards, following an estimated 1-2 years for completion.

Investment Recommendation

TA SECURITIES has maintained its earnings forecasts and reiterated its “BUY” recommendation for the company, affirming the target price of RM2.04 per share. This target price implies a potential upside of approximately 78.9% from its last traded price of RM1.14. The maintained rating is underpinned by the company’s ability to meet expectations and its clear strategic path for future growth across its diverse segments, demonstrating resilience and strategic foresight in a dynamic market environment.