Coastal Contracts secures rig sale worth RM807 mil

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KUALA LUMPUR (April 22): Ship builder Coastal Contracts Bhd has secured a sale order for one unit of Jack-up Drilling Rig (JUDR) to a ‘reputable’ oil company, for RM807 million.

Coastal Contracts (fundamental: 2.6; valuation: 1.8) told Bursa Malaysia that its wholly-owned subsidiary Thaumas Marine Pte Ltd had secured the order today, and is expected to deliver the JUDR in third quarter of 2015.

The deal is expected to contribute positively to the top and bottom line performance of the group for the financial year ending Dec 31, 2015, according to Coastal.

“I am pleased to announce that Coastal Group has secured a sale order of its first JUDR. With the latest sale, our cumulative sales order book has further increased to a high of RM1.92 billion, balanced with our long term charter contract for Jack-up Gas Compression Service Unit (JUGCSU) in Mexico,” Coastal Contracts’ executive chairman Ng Chin Heng said in a statement.

Currently, the group has a total order book of RM3.26 billion, of which the JUGCSU charter contract for Mexican state-owned petroleum company Petroleos Mexicanos constituted RM1.34 billion; while the remaining came from vessels sales and the aforesaid JUDR sales, which constituted RM1.11 billion and RM807 million respectively.

“The decision to sell our first JUDR was in order to reduce the company’s exposure to a potential downturn in the drilling market,” Ng explained.

Ng also said the management believes the sale of JUDR is a positive move, given the current market environment.

“On our second unit of JUDR, we are in the midst of negotiating a drilling contract with potential charterers. The construction for the second JUDR is progressing smoothly and we expect the construction to be completed by the fourth quarter of 2015,” he added.

Coastal Contracts’ share price fell one sen or 0.33% to RM3.01 today, valuing it at RM1.6 billion.

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)