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Marco Polo Marine: Bracing news from Indonesia.

Sunday, July 21, 2013

Some news from Marco Polo Marine's subsidiary, PT Pelayaran Nasional Bina Buana Raya Tbk:


1. They are seeking to purchase another new AHTS before the end of 2013. I like this because this will allow them to capitalise on the higher rates in Indonesia more rapidly.

2. The management is projecting at least a double digit growth in revenue and profits in 2013!

Things are looking pretty good and the Indonesian growth story is cruising ahead at full steam.

Would I buy more of Marco Polo Marine's stock?

If Mr. Market is willing to sell to me cheaply again, why not?

Related post:
Which stocks have I been accumulating in June 2013?

Reference:
RESUME HASIL PAPARAN PUBLIK TAHUNAN

62 comments:

hydrogenperoxide said...

You managed to understand what do they say there? @.@

AK71 said...

Hi Pero,

You don't remember that I am one quarter Indonesian Chinese? ;p

Capricon said...

AK
The 52wks low is about 30cts, a bit down trend now, any "safer price" to enter ?

Capricon

yeh said...

I have bought more during recent sell down:)
Hope it cheong!

AK71 said...

Hi Capricorn,

I would be very surprised if it should revisit 30c again. I cannot tell you that it won't but if it should happen, I am going to buy much more, if its fundamentals are unchanged.

For now, I see immediate support at 36.5c and will probably add to my long position if it should be tested.

AK71 said...

Hi yeh,

It could take a while more before Mr. Market warms up to this stock, I feel. :)

JCK said...

I hope it goes back to 35 cents when I last bought........ :)

P/s sold all at 39.5

Tan said...


Hi AK

Their IR very fast response, sent email uring weekend and get reply Monday !


HI Marco,
 
Possible to disclose the below details?http://www.marcopolomarine.com.sg/offshore-division-fleet.php
 
1) Are the vessel being chartered out at the moment?
2) What is the daily rental rate?
3) Usually how long is the contract length? 6months? 1  year?


1)      All our vessels are on charter at the moment with respect to the offshore fleet, except for the most recent 9,000 BHP where our subsidiary PT BBR acquired and took delivery last month. It is currently undergoing reflagging exercise to Indonesia flag.
 
2)      We don’t reveal our charter rates to the market. As you would understand, these are very commercially sensitive information. The end-charterers would want to keep the information confidential well. As general information, the market is about US$1.80 per BHP per day for AHTS whereas vessels in Indonesia enjoys a premium due to Cabotoge Principle at U$2.00 per BHP per day.
 
3)      It depends. They may range from 3 months to 1 year, to 1+1 years to 500 days firm. We actively manage our fleet so as to minimise off-hire down time.

Tan said...

Hi AK

I might sent in few comments (same content) as facing difficulty for my iPhone, sorry for that ..

Gregg

David & Thi said...

There has been large sell queue at 0.38 - 0.385 over the past few days.... whether why insider has not been buying up recently... maybe because of black-out period since he has brought more at higher price in the last few months

AK71 said...

Hi JCK,

35c is a possibility, of course. :)

I was wondering why the share price declined. Ah, it was because of you. LOL. ;)

AK71 said...

Hi Gregg,

Hey, no worries about repeated comments. I can manage them. :)

Thanks for sharing the reply from Marco Polo Marine. Really appreciate it. :)

AK71 said...

Hi Yee,

Although it would be nice to have insiders to be continually buying, I think it could be a good thing that they stop for now so that we could possibly buy at lower prices as weaker long holders sell. ;p

David & Thi said...

Hi AK71,

I have been collecting slowly.... :) It seems to be forming a base around 36.5 and 37 cents and don't want to miss the train..

The last acquisition of vessels come with very high ROI due to leverage play funded both equity and debt. Besides that, it is a distress sales.

The management seem to have very good foresight...





AK71 said...

Hi Yee,

I share your view on things.

I will be accumulating if it should test 37c again for support. :)

JCK said...

Hi AK

That's right...

The reason why Marco cant get pass 39 cents! ;0)

AK71 said...

Hi JCK,

I think we need to throw a party for you.

Heard of Blanket Party? LOL. ;p

yeh said...

hi AK,
want to ask you regard vard holding.
you still holding?

now it dropping like a falling knife:(

scary

AK71 said...

Hi yeh,

Well, I looked at the chart and it isn't that scary really. The momentum oscillators are either flat or turning up. Negative momentum has weakened.

I have a very small long position here and my entry price is not high. So, I am not really worried.

Not my style to sell as prices are declining anyway. :)

Tan said...

Hi AK

Back to MARCO email, what is Cabotage Principle, is it vessel that under Indonesia flag will have premium prices? For eg US$2 premium compare to normal rental rate

Gregg

AK71 said...

Hi Gregg,

Here you go:

1. Marco Polo Marine: Indonesian Cabotage Law.

2. Marco Polo Marine: Indonesian Cabotage Law (Part 2).

yeh said...

my entry price is 79 cent and 84 cent.
today just average down

AK71 said...

Hi yeh,

I have not added to my position since my initial entry. Want to spot a positive divergence before adding. In the meantime, quite comfortable holding on. :)

Tan said...

Hi AK

Seem like the newly acquired vessel contribution will only kick in either Q3 or Q4 2013. See the reply again.

Questions:
1) During the chartered period, who will bear the maintenance cost? Marco or the customer side?
2) Referring to item (1) in the previous email, what kind of reflagging exercise? is it something to do with vessel registration with Indonesia Government? How long it took for the whole reflagging progress and when will be the expected delivery (chartered) to customer?

From Marco
We charter OSVs on time charter basis.
The maintenance is to our cost but we do factor in depreciation when we provide the quotation to our customer. In order words, the charter revenue would be able to cover regular maintenance.

It is the Cabotage Principle where vessels plying in Indonesian waters have to be Indonesian flag. For reflagging, the said vessel must be majority-owned by Indonesians and have a 5,000 gross weight tonne vessel in the fleet among other regulations. Without going into details, we are able to flag Indonesian because we own 49.6% of PT BBR (which is listed on the Indonesian Stock Exchange). So reflagging is not just an administrative process and you may expect that this is actually one of the Group’s core competitive strengths.

To round up, the reflagging exercise typically takes 2 to 3 months, and we are midway through the process.

AK71 said...

Hi Gregg,

Thanks for sharing with us your latest exchange with Marco Polo Marine. Appreciate it. :)

Tan said...

HI AK,
I have limited knowledge (Half pail water) in interpreting financial report, maybe you can enlighten me a bit.
Q2 Report (http://marcopolo.listedcompany.com/newsroom/20130509_173806_5LY_FA6820A673E9FB8348257B6600343023.1.pdf), pg4, there was $90mil amount repayable after one year, vs Q1, $20mil (http://marcopolo.listedcompany.com/newsroom/20130125_172733_5LY_EE138D10E0E158BA48257AFE002CA8B9.1.pdf), I thought we should expect increase of cash flow (inflow), but did not see the similar increase in the cash balance. Where does the money go?

Gregg

David & Thi said...

Somebody which clear that over 600k sell block 0.38 block yesterday. Big fish seem to be buying up or maybe insider at work?

David & Thi said...

Technically 14 days RSI is below 30 which signal oversold.

If 0.37 hold and break above 0.40, it will give us a higher low and higher high...

Waiting happily.....

AK71 said...

Hi Gregg,

I believe gearing level has gone up to fund the expanding OSV fleet. Cash flow will improve but increasing CAPEX in the meantime is to be expected.

This is my half pail water interpretation. ;p

AK71 said...

Hi Yee,

Technically, Marco Polo Marine's share price is consolidating. It needs to form a stronger base before moving higher. This is one stock I am very comfortable with holding for much longer. :)

David & Thi said...

Hi AK71,

Are you the one who brought over 600 lot yesterday? Leave some for others okay?

I keep buying and buying... now Marco Polo is my largest stock holding... waiting for the spark to ignite firework...

All the best to fellow shareholders.... :)

AK71 said...

Hi Yee,

Me? I protest! I am innocent! LOL! Well, really, I am. :)

I am waiting at 37c. ;p

Marco Polo Marine is, at the moment, also my largest investment in the stock market.

tostubi said...

Hi AK,

are you really not scare of this big seller who keeps selling more than 500 lots at one go. just happened again at .385.

800 lots this time... phew...
i know you once said many reasons to sell only one reason to buy.

but this selling is really big... it's almost like someone with a large position slowly offloading bit by bit.

AK71 said...

Hi tostubi,

Oh, that is JCK. Not to worry. LOL. Nah, kidding. ;)

Well, if the facts are correct and my reasoning is sound, I don't really have a reason to fear especially if I got in at a fairly good price. :)

Bel Wong said...

Hi AK71

I checked its Free Cash Flow for the past 5 years (Cash from Operations Activiites - Capital Expenditure), there are all in red.

and their CAPAX Ratio also > 80% ( 2012 161%, 2011 430%, 2010 313%, 2009 596%, 2008 306%, 2007 196).

Is it reflect that they are facing Cash Flow difficulties ?

AK71 said...

Hi Bel,

In combination, you have a clue what is happening. :)

The company is making large investments. So, free cash flow is negative.

Are the investments good for the company? This is a pertinent question.

Now, look at the ROE and we see a more complete picture. It measures profitability. :)

Tan said...

Hi AK,

Chartered margin is much better than shipbuilding and repair.

Gregg


Question to Marco:
For the Shipbuilding/Repair segment, how long will the current total order book last? and what is the utilisation rate for the shipyard, >90% usage?

Reply:

Thanks for your email.

The important point is that we do not build speculatively and that historically and currently, we are building for our own expansion.
There are offers to buy the vessels that we build for about 10% margin but that newbuilt sale profit i.e. cash flow, can be recouped in just one year of charter given the current charter rates.
The main driver of the Group would hence be the increase in the charter income of OSVs at rising charter rates at enhanced profit margins and increased fleet size.

Shiprepair services as mentioned in our announcement tend to be more ad hoc but have faster turnaround. The current utilization rate is about 80%.




Bel Wong said...

Hi AK71.

thanks for replying. But It looks like its cash flow issue isn't just happening now, instead it happened since 5 years. I am doubt at this point.

For ROE, I normally refer ROE > 15% consider good.

for MarcoPolo, this is the figure I found for the past 5 years.
2012 15.08%
2011 14.01%
2010 20.78%
2009 13.82%
2008 19.86%
2007 33.07%

Is it consider good or just moderate ok.?

Thanks for your sharing..





AK71 said...

Hi Gregg,

That is really good news. I think it is invaluable in increasing our confidence as investors in the company.

The CEO did mention that chartering OSVs is going to be their main engine of growth. It seems that he was being economical with the details.

In another 2 or 3 years, Marco Polo Marine's stock is going to be worth much more and there is greater clarity now.

Thank you so much for sharing. Really appreciate it. :)

AK71 said...

Hi Bel,

It is a company that is very much in the growth stage. So, high CAPEX in the initial years is reasonable. I am more concerned about how it is able to make use of this to generate returns for shareholders.

Being in a cyclical industry and still being able to maintain an average ROE of 15% or more is not easy. Marco Polo Marine has done it and I am impressed.

Although we only have past numbers to refer to, I think when we invest in a company, we have to look into the future and see what it could be capable of. Past numbers are, well, in the past.

This is why Warren Buffett says we have to try to think like both an investor and a businessman. :)

Tan said...

Hi AK

Since the new vessel is still under reflagging progress and full contribution only kick in next quarter...also couple with low shipbuild margin, Q2 might be flat or slightly better compare to Q1... And this is the time to accummulate more...

Do you know where to check or monitor charter rate?

Gregg

AK71 said...

Hi Gregg,

Yes, I agree that for anyone who is interested in investing in Marco Polo Marine, buying some now isn't a bad idea. :)

Unfortunately, I don't know if there is a place where OSV charter rates are published daily. It is probably a matter of bilateral agreement.

Tan said...

Hi AK,

Some good news and our patience will be paid off soon (hopefully)

I might be testing your patience by copy and paste the email one by one here...lol... :)

Question:
Could you possible disclose how many vessels are in the schedule being built for own company expansion at the current period? And when will be estimated charter timeline if there is new vessel come on board.

Replied from Marco:
We build in stages (it does not make sense to cut 6 sets of steel at the same time, then installing 6 set engines at the same time, then sea trial etc).

The current capacity is that we can build 6 at one point in time. Currently, we are already fabricating 2 AHTS (i.e. steel has been cut and hull ready), 2 to start very imminently.

As mentioned previously, investors may rest assured that we do not build speculatively.

AK71 said...

Hi Gregg,

Hey, please keep the comments coming. I really appreciate you taking the time and effort to share. I am sure readers appreciate it too. :)

As long as we have the facts right and as long as our reasoning is sound, we have done all that we can. Now, we just have to sit back and wait. :)

Tan said...

Hi AK,

Thanks for your compliment.

We can just do simple calculation:
Current ShipYard Utilization Rate: 80%
Its capacity can build 6 vessels at one time and currently fabricating 4 vessels, it is about 67% utilizatoin, probably left only 13% for ship repairing.

Hence, we can make the assumption that Q3 (April-June), ship repairing segment might be either flat or lower than Q2. So, bulk of profits will still coming from Chartering business.

From the link: http://www.marcopolomarine.com.sg/offshore-division-fleet.php , newly acquired MP Prevail is the highest BHP (9000) which is under reflagging exercise, the rest are less than 8000.

We should see the profit bump up when MP Prevail come in service and this vessel is going to be highest revenue contributor.

Another catalyst will be from another 4 Vessels (2 under fabrication and 2 going to start imminently) and hopefully those can be happened by next year.

There is another bunker tanker business that i could not find more details, will ask IR officer to see what i can get.

Oh no.. i found no reason not to buy and accumulate now.. hehe.. :)

p/s: hopefully my assumption is correct.


Regards,
Gregg

AK71 said...

Hi Gregg,

I think they have another AHTS which is 8080 BHP, iirc. This was their biggest and it is still very new too.

Honestly, the company's track record is considered very good in the industry. The management is more than competent.

Of course, their potential and how the management is executing their plans to realise this potential are attractive.

Technically, share price is still consolidating. I must be more diligent with putting in overnight buy orders at 37c. ;p

Tan said...

HI AK:

They are building 8000 BHP, big vesseel.. :)


Reply from Marco:
We are building basically 8000 BHPS AHTSs.
As for bunker vessel as per the other email, suffice to say that as per announcement, we are evaluating opportunities but our focus is on OSV expansion.

We have reached our blackout period prior to our results release.
We will be pleased to be in discussion with you after our quarterly results slated for release about 12 August 2013

Tan said...

Hi AK,

Is all the AHTS (MP XXXXX) under BBR?

I tried check BBR annual report, http://bbr.co.id/download/BBRM_2012_Annual_Report.pdf, in page 97, i only see MP Veloce, MP Premier and MP Prelude, can’t get other vessel. Do you have any ideas?

BBR 1H2013 result, seeing increase of profit. http://www.idx.co.id/Portals/0/StaticData/NewsAndAnnouncement/ANNOUNCEMENTSTOCK/From_EREP/201307/5990a11131_6262d7613b.pdf

Regards,
Gregg

AK71 said...

Hi Gregg,

It makes perfect sense for them to build AHTS of 8000 BHP since there is a bigger shortage of such vessels in the country. The daily rates they can command are also much higher. :)

As for ownership of vessels, best to ask the IR at the company. Frankly, the speed at which they respond to your emails is impressive. Rather forthcoming with details too. Thumbs up!

However, if I remember correctly, not all vessels are owned by BBR. Some belong to MPM.

Thanks for providing the link to BBR's 1H 2013 results. :)

David & Thi said...

Thanks Gregg for helping us to get more information on Marco Polo.

Today another large block of sell order at $0.385 wonder whether it is real sell order or smoke screen to accumulate stocks from weaker holders....

Sitting tight awaiting improvement in result.

Tan said...

Hi AK,

I think they are trying to hint me to stop asking question, lol

"We will be pleased to be in discussion with you after our quarterly results slated for release about 12 August 2013"...

Probably let me think what to ask then, send them email again after 12 Aug..

Quite appreciate for the IR officer in responding the email, something that i feel beyond my expectation.

First Reit IR officer also very good, that time i sent in some questions asking their financial statement, then, they arrange phone call by the CFO, Victor.
Imagine i am just small fish (retail investor) and really not expecting Big Company CFO willing to call me.

Regards,
Gregg

AK71 said...

Hi Yee,

I agree that Gregg has done all of us a big favour here. :)

38.5c is still undervalued and although I really don't have any proof, I think the wall is a smokescreen. LOL.

Hi Gregg,

It shows how much they value retail investors and it is the right attitude.

We might not be in the big league but we are still investors. :)

Tan said...

Hi AK/Yee,

My 10lots order @ 0.380 were matched. :)

We have bumped up this post rank#02 for the week.

Cheers,
Gregg

AK71 said...

Hi Gregg,

I am still waiting at 37c to increase exposure. LOL.

Tan said...

HI AK,

It is thin volume recently, hopefully it is at the bottom price.. lol.


低量不一定是底部,但底部一定是低量.. (Quoted from Taiwan Finance Talk show, 57Watchers, Cai Shen Guru).

REgards,
Gregg

AK71 said...

Hi Gregg,

I agree that thin volume shows a disinterest on the part of Mr. Market. How this disinterest should be interepreted is something else.

38.5c is where the 20d MA has flatlined. The 50d MA is descending and this could push down share price but it would also mean that the 20dMA would move above the 50d MA.

As a longer term MA is supposed to be stronger, I expect price to weaken but I would be quite happy to be proven wrong. After all, when the volume is so thin, TA's accuracy is greatly compromised.

Tan said...

Hi AK

In term of accounting, how to record BBR profit and Debt in MARCO income statement and balance sheet? By percentage,49%?

Gregg

AK71 said...

Hi Gregg,

As I am not a trained accountant but with my simple minded understanding of a consolidated statement, it should be total.

Tan said...

Found this interesting link,
http://www.marinemoneyoffshore.com/node/3684

AK71 said...

Hi Gregg,

Yup. Saw that some time back and blogged about it too. :)

Capricon said...

Good Q3 results released today.

AK71 said...

Hi Capricorn,

From certain angles, yes. :)

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