Table below shows Coastal's past financial performance.
This showed how robust O&G industry was before it crashed in 2008.
Just like a property developer, if the sales is poor in this year, then we can expect poor financial results in about 2 years time.
It is reported that this contract is estimated to deliver profit (pre/post-tax?) of RM30-40mil a year to Coastal.
Despite poor sentiment in O&G industry, Coastal's plan is clear.
First, it has a mission to reach RM5bil in market capitalization in medium term. For this to happen, its share price need to be at least RM8.50!
Its current share price and market cap stand at RM2.51 and RM1.35bil respectively.
Coastal has already owned one upstream O&G asset. Can it get another contract for its JU rig by year end?
It is recently reported that it is in talks with several parties for potential merger & acquisition to grow the company inorganically.
Is it the right time to invest in Coastal? I think no one can answer this question confidently.
I learned that crude oil price is deliberately depressed by OPEC to gain more market share by forcing out less efficient US shale oil producers. Can it be done in such a short period of time?
Iran sanction on oil export is going to be lifted. How low the oil price can go after this and how long will it stay low?
Coastal does not pay attractive dividends. It paid 7.2sen dividend for FY14 which is 20% of its net profit.
Even though its share price has dropped to RM2.50 level again, dividend yield is still not that great at 2.8%.
It posted a superb result in FY15Q1, in which both quarterly revenue and net profit hit record high by a huge margin.
This is mainly due to more high margin OSVs (5) delivered in the quarter. Subsequent quarters are not expected to match FY15Q1 performance.
Balance sheet is healthy with plenty of net cash after getting RM207.8mil from private placement in Mac14.
Coastal's share price has fallen more than 50% from its high of RM5.40 in Aug last year to RM2.51 at the moment.
With FY14 EPS of 36.7sen, Coastal is currently traded at PE of merely 6.8x base on share price of RM2.51.
Fair PE for O&G sector should be at least 15x, isn't it?
Anyway, history has told us that Coastal will bounce back along with crude oil price.
It may come back stronger with its ambitious expansion plan.
The question is: When?