KUALA LUMPUR: Coastal Contracts Bhd (5071) could be a potential takeover target due to its cheap stock price and its shipbuilding yard in Sandakan, Sabah, a research firm said.
Sandakan will be the centre of most of the deepwater oil and gas activities in the future, said OSK Research in a report yesterday.
Coastal's "40ha yard which sits tight in a strategic area, ... is currently being coveted by many oil and gas (O&G) operators for conversion to facilitate fabrication or repair and maintenance jobs," it said.
OSK has a buy call on the stock with a fair value of RM4.85.
The stock closed at RM3.41 yesterday after gaining 11 per cent.
Its stock now trades at a price multiple of about 5 times versus the industry's 12-14 times.
Coastal has also shown consistent financial performance over the last two years, in contrast to other O&G companies.
"We believe this gives Coastal a strong advantage in positioning the company ahead of its peers as many of them have disappointed investors in one quarter or another," OSK said.
The group's shipbuilding yard is also big, about 60 per cent the size of Kencana Petroleum Bhd's yard. Its management has also told OSK of plans for bigger things.
Coastal has some RM760 million of orders now, which should keep it busy for the next 12 months.
"We note that its customer have remained loyal as there was minimal cancellation of orders, which had helped the company to maintain its performance over the last 2 years." - by btimes.com.my
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