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| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
TA Securities’ latest analyst briefing on Coastal Contracts Berhad highlights robust operational performance, strategic expansion initiatives, and secured contracts providing near-term earnings visibility. The investment bank maintains its “Buy” rating for the company, affirming confidence in its future prospects.
Robust Operational Performance and Growth Initiatives
The company’s existing gas processing plants, Papan and Perdiz, are operating at full capacity. The Papan Plant runs at 345 mmscfd, while the Perdiz Plant operates at 185 mmscfd. The Perdiz Plant contract is in place until December 2027, with further extensions anticipated beyond this period, driven by rising gas production from the Ixachi Field.
A second Papan Plant is scheduled to achieve Commercial Operation Date (COD) in November 2026, which will add 150 mmscfd of gas sweetening capacity. Furthermore, management is engaged in discussions with Pemex regarding a potential expansion of gas sweetening capacity at the Perdiz facility, aiming to address increasing demand. The scope, capacity, and timing of any such expansion remain subject to final agreement and contract award.
Asset Optimisation and Strategic Shifts
The company’s jack-up gas compression service unit (JUGCSU) has been suspended since November 2023 and has not contributed to earnings during this period. Initially, management had explored several potential pathways to monetise the asset, including conversion into a mobile offshore production unit (MOPU) with an estimated production capacity of ~40,000 barrels per day for a five-year tenure, or redeployment as a JUGCSU at an alternative field. However, management’s strategic focus has evolved, and the JUGCSU is now being considered for potential disposal. Any future decision regarding deployment or divestment remains subject to ongoing commercial and technical evaluations, indicating a more cautious and pragmatic approach toward asset optimisation.
Near-Term Earnings Visibility Secured
The company has successfully secured an 88-day liftboat charter contract from Saudi Aramco, entered into on December 5, 2025. This contract carries an estimated value of approximately RM7.4 million, comprising a 60-day firm period valued at ~RM5.0mn, with an additional 28 days of optional extensions worth ~RM2.4mn. While the on-hire commencement was initially scheduled for December 10, 2025, management indicated a slight delay, with the vessel expected to be on-hire in the coming days. Barring further delays, this contract is projected to contribute positively to earnings and net assets over FY25-FY26, with execution risks limited to normal operational factors.
Recommendation and Outlook
TA Securities has made no changes to its earnings forecasts for FY25-FY26. The firm maintains its “Buy” rating with an unchanged target price of RM2.21 per share, based on a sum-of-parts (SOP) valuation. This recommendation underscores the company’s solid operational foundation and strategic moves to enhance its long-term value, supported by ongoing expansion initiatives and secured contracts.
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