Marco Polo Marine:
Trading Below Book Value Despite Steady Profits
(BUY, SGD0.38, TP: SGD0.61)
MPM’s 3QFY13 results were in line with expectations, although y-o-y and q-o-q comparisons were muddied by significant one-off gains booked in 3QFY12 and 2QFY13. A steadily-profitable company at its core with a consistent 15% ROE, MPM is currently trading at 0.8x P/BV. With a strong FY14F expected after its current vessel charters are renewed at higher market rates, we maintain a BUY with a SGD0.61 TP.
3QFY13 results comparisons marred by one-off gains in prior comparable quarters. Marco Polo Marine (MPM) recorded 3QFY13 revenue of SGD28.6m and net profit of SGD5.7m, of which SGD4.3m was attributable to shareholders (ie. PATAMI). Earnings were down 52% y-o-y, but 3QFY12 saw a SGD3.6m one-off gain relating to foreign exchange reversals (See Figure 1 for details.)
Margins remain strong. MPM enjoyed robust profitability with its gross margin at 36%, EBITDA margin at 44% and net margin at 20%. These are sustainably high numbers, reflecting a lack of one-offs in this quarter. Stronger quarters ahead with new Offshore Support Vessels (OSVs) and renewed charters. We expect MPM’s growth to accelerate in FY14 as: i) new OSVs join the fleet, the latest being MP Prevail which was delivered in July, and ii) existing charters expire and are reset to the 33%-higher current market rate.
High-margin, steadily profitable company at 0.8x P/BV. At its core, MPM is a high-margin business which has been consistently profitable, delivering 16-23% in ROE for the last five years through the global financial crisis. Future operations should remain strong as the Indonesian offshore oil & gas industry continues to grow. We believe the stock is a steal, as it is currently trading at 0.8x P/BV.
Maintain BUY with TP of SGD0.61. We continue to like MPM for its: i) exposure to cabotage-protected Indonesian offshore oil & gas, ii) high margin businesses, iii) visible growth, and iv) attractive valuations. Key risks continue to be tug & barge fleet utilisation and operational complexity, while potential shipbuilding contracts provide upside. We maintain our BUY rating with a TP of SGD0.61 based on 8x FY14F EPS.
Publish date: 14/08/13