TA Securities upgraded Coastal Contracts to “buy” with a higher target price of RM2.47 per share. Here’s why.
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00:00 Our Struck and Focus this Wednesday morning is coastal contracts.
00:05 TA Securities upgrading the counter from neutral to buy, with a higher target price of RM2.47,
00:12 up from RM2.37 previously.
00:15 This after attending an analyst briefing with management.
00:18 Coastal contracts ended trading yesterday at RM1.99.
00:21 Key takeaways according to TA, first up, the group is liable up to US$30.4 million due
00:28 to a delay penalty in achieving a critical construction milestone for its Papan plant
00:33 in Pemex's Ixachi gas field in Mexico.
00:36 Fortunately, the research house says no further delay penalty is expected as the group has
00:42 achieved all the critical construction milestones for the Papan project.
00:46 Secondly, with the Mexico state-owned firm drilling new wells and upping the production
00:50 capacity of Ixachi field by the first half of FY24, both coastal contracts says Perdes
00:56 and Papan plants are also expected to ramp up processing capacity.
01:01 Thirdly, management is confident of obtaining Perdes plants' contract extension.
01:06 The group is currently finalising the terms with Pemex, with indicative extension duration
01:11 of 2 to 3 years.
01:13 TA raising its FY24 to FY26 earnings forecasts by 13.6% to 20%.
01:20 After hiking its tariff for the Papan plant, in line with the revenue breakdown for the
01:25 plant given by management, it said it upgraded its recommendation to buy and hiked its target
01:30 price to RM2.47 based on sum of parts valuation.
01:34 So what's the consensus?
01:36 According to Bloomberg data, there is TA's sole buy and two more hold recommendations
01:41 from CAF Equities and RHB Research.
01:44 Average target price RM2.29.
01:46 Coastal contracts last settled at RM1.99, so that's a potential upside of about 15%.
01:53 [Music]