Target Price: MYR3.00
No Major Surprises
COCO’s 1H13 net profit of MYR63.1m was in line with our but slightly below consensus full-year estimates. Despite lower 1H13 revenue, its overall profitability improved due to higher margins from its shipbuilding business. Maintain BUY, as we believe COCO stands a good chance of securing its maiden jack-up rig contract, which will prompt a higher valuation. We retain our FV at MYR3.00.
• In line. COCO’s 1H13 net profit of MYR63.1m (+3.0% q-o-q, +5.8% y-o-y) was in line with our but slightly below consensus forecasts, accounting for 49.3% of our and 46.8% of consensus full-year estimates. Despite lower 1H13 revenue (-15.3% q-o-q, -20.7% y-o-y), overall profitability improved due to better margins from its shipbuilding division.
• Declares first interim dividend. COCO declared its first interim dividend of 3.0 sen per share for FY13, representing half of our full-year estimate. Given that the company has paid out dividends in two tranches historically, we retain our dividend forecast and believe shareholders can look forward to another 3.0 sen per share towards year-end.
• Catalyst lies in its maiden venture. We believe that the company stands a good chance of securing its maiden jack-up rig contract, which will prompt a higher valuation. This is based on our view that locally-owned jack-up rigs are likely to be chartered in the upcoming renewal cycle.
• Maintain BUY. We currently value COCO at MYR3.00, pegged to 10x FY14 EPS, at a 25% premium to its historical mean of 8x, but below its historical high of 19x. However, with a potential jack-up rig contract in hand, we believe this could easily re-rate towards 13-14x forward earnings, in line with the other offshore asset owners. Maintain BUY.
Publish date: 27/08/13