I am sure most of you aware on this counter, a relatively low profile but fundamentally strong company, which is principally involved in shipbuilding.
Fundamental Analysis:
Since year 2007, Coastal managed to achieve a ROE of more than 30%, which is a remarkable figure. Profit margin of more than 23% is maintained, showing that their management is very competent in controlling the expenses to ensure maximum return to the shareholders. Also, it is worth to mention here that Coastal is able to achieve uninterrupted increasing trend of net profit from year 2002 to year 2010.
On the other hand, Coastal has just announced its 1Q 2012 result and it is simply a BIG disappointment for investors. Profit margin has dropped signficiantly to 13%, owing to relatively low margin derived from the sales to certain "repeat" customers. Would it imply, in other words, Coastal is unable to get new customers and the management has to offer discounts in order to retain their old customers?
Let us have a look on the advance payments received by Coastal :
2011 (320 mil),
2010 (422 mil),
2009 (524 mil),
2008 (429 mil),
2007 (199mil),
2006 (91 mil).
As seen, since year 2009, the advance payments has been depleting, signifying that its order book is depleting, an unhealthy sign for sure.
Technical Analysis:
Coastal has been traded below L1 line and it is showing that Coastal share price has entered into the bearish mode.
The question is: shall we catch the falling knife?
Conclusion:
By considering its current EPS which is merely 6.37 cts (annualise estimated EPS of 25.6 cts), the current price (RM1.74, closing price at 1st June 2012) is indeed attractive (PER = 6.8). However, this counter has been traded to a historically low PER of 3 - 4 (a very undemanding yet fundamentally strong counter). Based on this, it is not a wise decision to purchase this counter for the time being. Alternatively, you may buy in stages and keep it for long term.
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