For QE31/12/2014, Coastal's net profit dropped 28% q-o-q or 20% y-o-y to RM39 million while revenue dropped 24% q-o-q or 30% y-o-y to RM178 million. PBT dropped due to lower revenue contribution from the Shipbuilding division on the back of lesser OSV deliveries.
Table 1: Coastal's last 8 quarterly results
Chart 1: Coastal's last 42 quarterly results
Valuation
Coastal (closed at RM3.02 yesterday) is now trading at a PE of 8.2 times (based on last 4 quarters' EPS of 36.75 sen). The slowdown in the O&G sector is beginning to affect the earning of Coastal. If the same earning persists for the next few quarters, Coastal's full-year earning will be 29 sen. Thus, its forward PER would be lowered to 10 times. While this is not excessive, lower earning will be a drag on valuation going forward.
Technical Outlook
Recently, Coastal dropped to its long-term uptrend line support at RM2.25-2.30. From there, it staged a decent rebound to its 30-month EMA line at RM3.40. Further rise in share price will depend on the outlook for crude oil, which is still negative at this moment.
Chart 2: Coastal's weekly chart as at Feb 25, 2014_9.25am (Source: Share Investor.com)
Conclusion
Based on fair valuation & positive technical outlook, Coastal is rated a HOLD. However its earning could remain weaken and that would cap its share prices in the near term.
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Coastal.
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