Marco Polo Marine -
Target Price: SGD0.55
Surprise Dividend To Kick Off FY14
MPM posted FY13 PATMI of SGD22.3m, with core PATMI at SGD16.6m. The big surprise was a 1.4-cent special dividend - a strong hint of management’s optimism on FY14. OSV charter income should surge as charter rates have been reset at c.USD2.00/bhp/day vs USD1.50/bhp/day before. Valuations are undemanding at a 6.2x FY14F P/E, 3.7% yield, and 0.8x P/BV based on 25% core profit growth.
Maintain BUY and SGD0.55 TP.
■ FY13 a tumultuous year
MPM’s FY13 revenue ticked up only 4% y-oy as lower shipbuilding and drydock volumes offset the surge in chartering revenue. Its GPM widened to 37.2% from 32.5%, but this was eroded by higher staff costs and the consolidation of interest charges from associate PT Bina Buana Raya. As a result, core income sank 23% to SGD16.6m, but we think this has been priced in as MPM’s shares are currently trading at a 0.8x P/BV.
■ Special dividend hints at strong FY14F
The past two years’ dividends of 1.0/0.8 cents corresponded with the surge/fall in core income for FY12/13. Thus, the large 1.4-cent dividend just declared seems to signal management’s expectation of strong income and cash flow in FY14F.
■ Still tough going for tugs & barges, shipbuilding segments
Two of MPM’s four segments continued to face headwinds, posting a lower utilisation rate (c.75%) for its fleet of tugs and barges on top of a general dearth of new building contracts. To remain conservative, we trim our FY14/15F forecasts by 19/11%, but highlight the upside potential from unexpected shipbuilding contracts or asset acquisitions.
■ Looking to enter new cabotage-protected asset class
Management is looking to enter into a new asset class which will soon enjoy cabotage protection in Indonesia. On our shortlist of these asset classes are seismic and diving support vessels by end-2013, offshore construction vessels by end-2014, and drilling rigs by end-2015.
■ Highly appealing valuation
MPM’s 6.2x FY14F P/E, 0.8x P/BV and 3.7% yield are undemanding. As core earnings are rebounding, we peg our TP to 9x FY14 P/E vs 8x, but trim it to SGD0.55 from SGD0.61. The key catalysts are announcements of new asset acquisitions and shipbuilding/conversion contracts.
Publish date: 28/11/13