Marco Polo Marine: Record Net Profit Of S$25.2 Million Achieved For FY2013 On The Back Of 9th Consecutive Year Of Record Revenue And Gross Profit.

Revenue upped by 4.1% to S$93.5 million in FY2013 from S$89.8 million in FY2012 with gross profit increased by 19.2% to S$34.8 million in FY2013 from S$29.2 million in FY2012. Laudable performance attributed mainly to the Group's ship chartering business, particularly from the offshore operations. EPS enhanced by 4.8% to 6.56 Singapore cents in FY2013 from 6.26 Singapore cents in FY2012 while NAV per share hiked by 15.5% to 47.8 Singapore cents as at 30 September 2013 from 41.4 Singapore cents as at 30 September 2012. Special interim dividend of 1.4 Singapore cents per share being declared...

By Low Pei Han 
Thu, 6 Jun 2013, 09:22:20 SGT

After BBR’s listing on the Indonesia Stock Exchange early this year, Marco Polo Marine (MPM) has been increasingly branding itself as an entity for investors to gain exposure to Indonesia’s growing offshore sector. Demand for larger sized AHTS vessels in Indonesia is expected to increase, benefitting owners such as MPM. Meanwhile, the ship repair business has seen a slow-down, which management thinks is seasonal. The ship chartering business, on the other hand, provides a steady base load of earnings. The long-term future of MPM looks bright, but time would be needed for significant earnings growth and a re-rating of the stock. We last rated MPM a HOLD with a fair value estimate of S$0.51. Due to a re-allocation of internal resources, we are ceasing coverage on this counter.

Banking on offshore Indonesia
After BBR’s listing on the Indonesia Stock Exchange early this year, Marco Polo Marine (MPM) has been increasingly branding itself as an entity for investors to gain exposure to Indonesia’s growing offshore sector. Indonesia currently has only a handful of AHTS vessels that are of at least 8,000 BHP, but there are expectation of more tenders of oil plots in certain parts of offshore Indonesia such as Sulawesi where the waters are rougher and where the demand for such larger vessels is likely to be higher.

Slow down in ship yard business, but hopes for new orders
In the last quarter, there was no shipbuilding revenue as revenue from BBR could not be recognized (eliminated from accounting consolidation) since BBR became a subsidiary. There was also no third-party work, which has been the case for some time. However, management expressed the possibility of securing external OSV orders in the coming quarter. Ship repair also saw a slow-down, which management thinks is seasonal. 

Ship chartering provides a base load
Management is still upbeat on the outlook for the ship chartering business its entire fleet of offshore support vessels continues to see high utilisation rates. Looking ahead, the offshore division is expected to be one of the major drivers of growth going forward, as the group plans to increase its OSV fleet over time, either by its internal building operations or via purchases from external parties.

Ceasing coverage
The long-term future of MPM looks bright, but time would likely be needed for significant earnings growth and a re-rating of the stock. We last rated MPM a HOLD with a fair value estimate of S$0.51. Due to a re-allocation of internal resources, we are  ceasing coverage  on this counter. 

...Last Done: $0.395...

Marco Polo Marine (MPM) reported a 31% YoY fall in revenue to S$21.3m but a 121% rise in net profit to S$9.3m in 2QFY13, such that 1HFY13 net profit accounted for 58% of our full year estimate. Excluding an exceptional gain of S$5.7m, core net profit was about S$3.7m, slightly below our expectations. There was a slowdown in ship repair, and there were no external newbuild orders. However, management expressed the possibility of securing external OSV orders in the coming quarter. Meanwhile, the group is still upbeat on the OSV segment. YTD, MPM’s stock price is up about 11% vs the STI’s 8% gain. We tweak our estimates to account for the lower-than-expected performance by the ship repair division, and as such our fair value estimate drops from S$0.56 to S$0.51. As there is now a less than 30% upside potential for the stock (market cap less than S$150m), we downgrade MPM to HOLD.

Soft 2QFY13 results
Marco Polo Marine (MPM) reported a 31% YoY fall in revenue to S$21.3m but a 121% rise in net profit to S$9.3m in 2QFY13, such that 1HFY13 net profit accounted for 58% of our full year estimate. Excluding an exceptional gain of S$5.7m, core net profit was about S$3.7m, slightly below our expectations. The lower revenue was mainly due to lower contributions from the shipbuilding and repair segment at S$4.8m (-51% QoQ, -82% YoY). Ship chartering revenue (S$16.5m) grew 200% QoQ and 237% YoY, mainly because of BBR, which is now consolidated in MPM’s financials. Gross margin was 42% in 2QFY13, compared to 27% in 2QFY12 and 39% in 1QFY13.

Slow down in ship repair
There was no shipbuilding revenue in the last quarter as revenue from BBR could not be recognized (eliminated from accounting consolidation) since BBR became a subsidiary. There was also no third-party work. However, management expressed the possibility of securing external OSV orders in the coming quarter. Ship repair also saw a slow-down, which management thinks is seasonal.

Supported by ship chartering operations
The group is still upbeat on the outlook for the ship chartering business currently its entire fleet of offshore vessels is on charter. As mentioned in our earlier reports, we expect the offshore division to be one of the major drivers of growth going forward. Management plans to grow the number of OSVs under BBR from three now to five by the end of this year, and add four more in 2014.

Downgrade to HOLD
YTD, MPM’s stock price is up about 11% vs the STI’s 8% gain. We tweak our estimates to account for the lower-than-expected performance by the ship repair division, and as such our fair value estimate drops from S$0.56 to S$0.51. As there is now a less than 30% upside potential for the stock (market cap less than S$150m), we downgrade MPM to HOLD.