Coastal rises on Financial Daily report that it aims to double market cap to RM 5 bil

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KUALA LUMPUR (Sept 08): Coastal Contracts Bhd shares rose today on a The Edge Financial Daily report, stating that the company aims to double its market value to RM 5 billion with oil & gas (O&G) upstream expansion.

At 3:29pm, shares of the offshore support vessels operator rose 7 sen or 1.39% to RM5.10 per share, with 188,900 shares traded.

The Edge Financial Daily reported today that the company’s executive chairman Ng Chin Heng said the company would be able to achieve a market capitalization of RM 5 billion, within the next 5 years.

“At our target market capitalization of RM5 billion, each share could be worth some RM10,” Ng said.

An analyst familiar with the stock concurred with Ng’s view, stating the target is achievable within 5 years time.

“I would say within the next 2 to 3 years, could be possible as well,” the analyst said.

In a note published last month, oil & gas analyst Cezzane See of Kenanga Research placed a target price of RM5.94 per share, with an “outperform” rating on the company.

Commenting on the company’s outlook, See said the company may benefit from cross-selling opportunities with its entry into Mexico.

“According to our channel checks, there are more than 40 jack-up rig contracts in South-east Asia expiring from mid-2013 to 2015, which implies abundant opportunities on the horizon. Moreover, there could be cross-selling opportunities with its entry into Mexico,” said See.

She added that the company’s stock is trading at a relative discount to its other small to mid cap peers.

“The stock is also trading at CY14-15 price earning ratio (PER) of 13.7 times and 12.0 times respectively, which are at attractive discounts to other small-mid cap peers like Yinson, which are trading in the high-teens,” See said.

“We maintain our target price to RM5.94 based on an unchanged 14 times PER, which is above the stock’s historical average valuations. However, we believe this is justifiable, as it is moving into asset ownership business model,” recommended See.