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Marco Polo Marine: It got cheaper.

Thursday, August 29, 2013

Mr. Market has been oozing pessimism and I mentioned in a comment recently that Marco Polo Marine's stock is looking very attractive to me now but I also mentioned that cheap could get cheaper. It would be safer to add to my long position if I should see a reversal signal.

Well, I think I might be seeing positive divergences. One could argue that Marco Polo Marine is such a thinly traded stock that TA is practically useless. Valid point.

Then, what about FA? If I were to use the EPS for FY2013 which I estimated in an earlier blog post to be 5.4c, at a share price of 34c, we are looking at a PER of 6.3x. I think that is pretty attractive considering that I expect FY2014 EPS to improve significantly by some 20%.

Marco Polo Marine is my largest investment right now and its current share price isn't that far from the prices I first paid more than a year ago. Those were at 31.5c to 32.5c.In fact, I also bought more at 34c in September last year.

I believe buying at 34c now provides more margin of safety and better value for money than a year ago. Now, who says opportunity doesn't knock twice?

Related post:
Will FY2013 better FY2012?


Gary said...

Hi AK, e price went up to $0.42. What a surprise to me!!!!!

Gary said...

My bad! I saw wrongly!!!! The price was for Lippo Mall REIT...sorry!!!!

AK71 said...

Hi Gary,

You got me excited for a while there! Aiyoh, my weak heart is already badly affected by the China Minzhong debacle. No more excitement, please. ;)

Solace said...

Hi AK,

Welcome Back!!

Just like you, i am observing the market w interest. I have shares purchased in Marco Marine at about $0.40. I have queued to average it down at recent low.

Btw, i finished reading a book by John Bogle recently. Founder and Ex CEO of Vanguard Group.

I enjoyed it very much.

"The Little Book of Common Sense Investing"

"A low-cost index fund is the most sensible equity investment for the greatmajority of investors. My mentor, Ben Graham, took this position manyyears ago, and everything I have seen since convinces me of its truth.In this book, Jack Bogle tells you why."
--Warren E. Buffett, Chairman, Berkshire Hathaway Inc.

AK71 said...

Hi Solace,

Was I ever gone? ;p

So, you managed to get more at 34c? Congratulations!

JJ said...

Hi AK!

Knock! Knock! Yes's coming back to pick me.

I missed the last trip.


AK71 said...

Hi JJ,

Guess what? I am still on the boat. ;)

Tan said...


Was asking Marco regarding the MP Prevail progress and contract settlement is in USD or IDR payment. Here is the reply:

With respect to MP Prevail, it is still undergoing reflagging exercise.
We are currently negotiating on a few leads and it is expected to close shortly.

For OSVS, they are all in USD dollars.
At the operation level, we are almost exchange rate, i.e. USD neutral.
For BBR, the reporting currency is USD on the back of the fact that the bulk of our revenue is now in USD"


AK71 said...

Hi Gregg,

That is very reassuring. We don't want income in a depreciating Rupiah. ;)

Thanks for sharing this. :)

Tan said...

Hi AK,

I believed all the operating expenses like overhead cost should be in Rupiah settlement, and bulk of revenue are in USD... wow... should we expect higher profit margin in the coming quarters? lol..... :)

AK71 said...

Hi Gregg,

I think I might have palpitations just imagining that!

This is definitely a buy with conviction kind of stock for me. ;p

Gary said...

Hi AK, sorry to got u overly excited too!!! Anyway, can I have a sensing which did u start reading? Was it FA or TA first??

AK71 said...

Hi Gary,

Hmmm... FA, then, TA, then, FA again. Then, more TA. Now, FA again. Definitely was FA first but since then, I just picked things up along the way.

For people who want to be traders, TA is more important. People who want to be investors? FA is more important. However, if you are confused like I am, both are important! ;p

Investment Articles said...

Hi AK,

How do you view the low current and quick ratios of this company. because i feel a bit uncomfortable with low current ratio. Both ratios are less than 1. In addition, do you think that the capex is quite high every year? in the event of economy downturn or high interest rate, how can this company survive? thank you,

AK71 said...

Hi IA,

The current ratio, the last I look anyway, is more than 1. The quick ratio, which is more conservative, is less than 1.

Marco Polo Marine is in a high CAPEX phase as it is aggressively growing its fleet to take advantage of the Cabotage Laws in Indonesia. Its gearing level has gone up as a result.

Expectations are for high margin OSV charters to continue driving earnings. If they manage their receivables tightly, with improving earnings, all else remaining equal, they should not have any financial issues.

Of course, if there should be an economic downturn, things could get dicey. However, as long as the price of crude oil remains relatively high and as long as the Indonesian government is bent on increasing oil production, Marco Polo Marine will continue to do well. Are these likely to change?

Money will go to where it is treated best. As long as the prospects are positive and the earnings robust, unless there is a global freeze up of liquidity like what we saw in the GFC, I don't think Marco Polo Marine would have problems refinancing if they need to.

Marco Polo Marine has a short history as a listed company but, in those few years, the management has shown their mettle. For a relatively small outfit that is in an aggressive growth phase, the management is even more important, especially when it does not have a cushion to fall back on.

I am not brushing off the risks which you have mentioned. They exist. Each of us will have to do our own FA and make our own decisions. :)

Value Investor said...

thank you. sometimes i think i am just too conservative. I bought Etika around 0.20 when i started to learn how to buy stocks. But over the time i was selling Etika due to its high debt problem. My last done price was 0.33. Now the price is 0.5. The boat has gone.

AK71 said...

Hi VI,

You made money on your investment in Etika. Congratulations. :)

There is really no accounting for price. We can do valuations but it is almost impossible to do a "price-iation". ;p

As long as we feel that a stock is over-valued or if there are simply more reasons to divest than to stay invested, selling is not a bad idea. :)

AK71 said...

Another potential value play is Indonesian- based OSV charterer Marco Polo Marine, one of the few operators with direct exposure to Indonesia’s booming oil and gas industry. Owing to the recently implemented cabotage rules, many foreign operators have been forced to abandon their operations in the country, leading to a shortage of capable OSV charterers and causing charter rates to rise rapidly. “With charter rates in Indonesia currently 30% to 40% higher than other markets, whoever owns the OSVs in the country is going to see some very nice earnings,” says Lee Yue Jer.

Indeed, at least four Marco Polo Marine OSVs are expected to complete their current charter terms within this year and next, and Lee expects the charters to be renewed at better rates. Shares of Marco Polo Marine are down 2% from the start of the year. At its closing price of 37.5 cents on June 20, the stock is trading at 4.8 times earnings. “This is a good level for investors to enter the stock,” says Lee.


AK71 said...

Margins remain strong. MPM enjoyed robust profitability with its gross margin at 36%, EBITDA margin at 44% and net margin at 20%.

A steadily-profitable company at its core with a consistent 15% ROE, MPM is currently trading at 0.8x P/BV.

OSK DMG, 18 August 2013.

Kelvin said...

Hi AK71,

For MarcoPolo wouldn't the depreciating Rupiah be a concern and weigh on the earnings? Or do they collect their earnings in SGD.


AK71 said...

Hi Kelvin,

Aiyoh, you didn't read Gregg's comments earlier? Scroll up and you will see. ;)


Hi AK,

Looking at CMF, RSI and MA lines, all points positively and most likely prices will move on up.

Currently trading at 35.5c, it's still cheap and one may choose to go long now.

However, short term fluctuations from QE (withdraw or not to withdraw... both will present volatility) as well as the pending Syria issue (to war or not to war... again more volatility) can be expected.

IMO, TA and FA are positive so it's a much clearer sign.

But Mr Market doesn't give two hoots about what I think :)

AK71 said...

Hi Solidcore,

At 35.5c now, FA tells me that the stock is still cheap but, of course, it could get cheaper. However, TA tells me that there is positive divergence. So, there is price support. What to do?

I don't think that Marco Polo Marine's business is liquidity driven. It is driven by improving fundamentals and a strong moat, no less. So, QE tapering or not, it will steam ahead. If share price should fall even lower, everything remaining equal, I will be buying more.

As for a war in Syria, that would push up oil prices. That is good for Marco Polo Marine's business, indirectly. Of course, I hope that there won't be a war. Bad things, wars.

I like the way you closed your comment. I might borrow it sometime. ;p

yeh said...

Hi ak.
I managed to average down at 34cent.
I have quite a lot of marco polo now.

AK71 said...

Hi yeh,

Wah! You got it at 34c too? Good luck to both of us. :D

JW said...

No comments on the FA but the TA not zhun in drawing leh...

If you draw carefully, it should be an expanding triangle which is supposedly bearish in nature, based on just TA.

AK71 said...

Hi JW,

I don't think TA is very useful for such a thinly traded stock but I guess we couldn't help it. ;p


Hi AK,

Marco Polo is doing better since 11 Sep, with a nice up in volume, good CMF and a rise in RSI.

Currently trading at 38cents that's a nice 11.7% for your lots at 34 :)

Is Mr Market waking up to this counter? Who knows but it is looking better :)

AK71 said...

Hi Solidcore,

Nice to see higher volume yesterday. Volume has not picked up today. Need volume.

Anyway, I don't mind collecting a little bit of dividend and holding if it is a fundamentally sound investment. I only worry when I hold on to speculative counters. :)

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