One of my favorite low PER counter, COASTAL has released it's latest quarter result on 24 Nov. I believe this counter has draws many investors attention, due to it's low PER and the capability of making money from the time of economy crisis until today.
Surprisingly for the first time, it's EPS has been dropped from 11.1 cents to 7.59 cents compared to previous year's quarter. The drop of revenue and profit are mainly due to lower number of vessels delivered and lower fleet utilization rate for vessel chartering. Nevertheless, it's gross and net profit margin has increased by 2% and 5% respectively.
From my opinion, the delivery of fewer vessels were due to lower demand impacted by the growing concerns over Eurozone sovereign-debt crisis, as we can see the global stock market were heading south for Q3 this year. Where by the demand should be picking back in Q4 and 2012.
Overall, the outlook for offshore O&G industry still looks good with the crude oil maintain at USD100 per barrel level. It is still a healthy growing company for 2011, with a net cash of RM180m. By next year, it can utilize it's net cash of over RM200m to do it's business expansion, which provide a very good opportunity. If not, it should provides better dividend yield to the shareholders. By looking at it's track record over the last 5 years, it is a good business to invest with, provided with reasonable dividend yield.
Another business opportunity for Coastal to bring in more revenue is that it looks for strategic business partner to work on offshore structure fabrication. But so far there is yet to have potential candidate. I hope the management walk the talk about this.
I have yet to re-invest into this COASTAL since the previous profit taking. By looking at the current share price, it stands at PER of 5, which has the potential to go up to 7 or 8 in a strong bull situation. I strongly believe this counter is a long-term investment counter to go for, if it can revised it's dividend policy and confirm it's future business plan in the near future.
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