Marco Polo Marine: Shipyard and Indonesia.

Why did Marco Polo Marine start a shipyard in 2005?

CEO: The shipyard is a support business with ship repair, conversion and maintenance... As we continue to grow..., we require more vessels... hence the natural progression into shipbuilding.

... the shipyard will remain focused on ship repair and conversions... the ship repair business is one that is seasonal but non-cyclical. If you own a ship, you are required to conduct mandatory servicing and maintenance.

Keppel Corp and Sembcorp Marine focus on shipbuilding and ship repairing of the larger vessels. We on the other hand target the medium and smaller vessels that take up most of the population of the ships around this region.

What are the prospects for Marco Polo Marine's core business, tug and barge operations, in Indonesia?

CEO: Indonesia produces over 200 million tonnes of coal every year... 36 new plants are currently being built in Indonesia and they have the combined capacity to generate over 20,000 megawatt of electricity.

... there are over 100 independent power plants in Indonesia, 80 to 90 additional tons of coal will be needed domestically in the near future.

How are you going to move the coal to the power plants? We need more tugs and barges because large vessels cannot manoeuvre around the rivers of the Indonesian mine sites... the demand for Indonesian flagged vessels will remain strong at least for the next five to six years.

Source: Marine Money Offshore.

Related post:
Marco Polo Marine: The CEO speaks.

Tea with AK71: Cute snack from Japan.

Cute packaging:

Strawberry flavoured chocolate snack. Cute!

From where? Japan.

Now, it is in my tummy. Burp.

Tea with Matt: Career path.

This article is contributed by a reader, Matt, who used to be the owner of an SME. Older readers might find themselves nodding their heads as they read the article while much younger readers might be somewhat incredulous. The article is as much an observation about life as it is a piece of good advice to anyone still in school or about to join the workforce. 

For most people, pursuing their passion is a luxury and if at the same time they can make a living out of it would truly be rare indeed. In our younger days, when we did not have to worry about earning a living, we were mostly idealistic. Many would project what they would be doing and earning when they graduate.

Reality sets in when we secure our first job and have to go through the grind day in and day out. Many begin to wonder what happened to all the good life graduates are entitled to after studying for so many years. Aren’t graduates supposed to be doing better than the average Joe ? Welcome to the real world where opportunities do not distinguish between the level of education you have gone through. Otherwise, the Forbes list of richest people in the world would all have Ph Ds.

 

Life is straight forward. If you cannot get the job that you love, then you better learn to love the job that you have. Otherwise, you will go through life miserably if you have to do the job for years to come. Learn more about the job and how you can do it better. Improve your skills so that you can move higher in the hierarchy and hopefully be paid more.

 

Meeting up twenty years later with my cohort from university showed a diversity of careers and success stories. The ones with better results, First Class Honours, were mostly in the academic field as most went for their Ph Ds. The surprising lot were those who were very active in ECAs and most had general passes but still graduated and are doing well in business. These were the bunch the rest of the class thought were wasting their time doing everything else except study. Looking at them now, their time spent in ECA did a lot of good in helping them to build up their skills in networking as well as to organise activities and developing their people skills.

 

During my time, we worked hard and proved that we could perform before the company paid us more. But increasingly, the attitude is pay me more, then I will work harder. In times of labour shortage, it may work. To compete, you have to show why you are better than the next person who is vying for the same job. It is only going to get more difficult with competition coming from all over. You would need to distinguish yourself from the crowd. Make yourself indispensable to your company. Make sure they feel a vacuum when you are not around. I can almost hear someone say, “Ya, right, easier said then done.” If it is that easy, then it would have been done by everyone and would not be special anymore. But how to do it?

 

Analyse your work environment. Volunteer to take up more responsibilities. Get to know the company’s operations and look for weaknesses and how to improve them. Network with peers in the same industry. Get yourself known by them. You have to be outstanding to be noticed, be it technical skills, organizational skills, knowledge of the industry etc. The ways are endless. You would need to tailor it to your own situation.

Read other guest blogs:

1. Tea with EY: Money talk, money laugh!
2. Tea with Skipper: How much is sufficient to stop full time employment?

Cooling measures for cars spurned.

Today, a report by Channel NewsAsia revealed that people are falling into debt because of the high cost of car ownership in Singapore. So, the measures by the MAS limiting car loans to 60% of the purchase price and imposing a maximum duration of 5 years in repayment period are good to have.

In fact, MAS should do more to educate the general public and to encourage financial prudence.

However, in the same report, it was revealed that "some credit companies that do not fall under MAS regulations are continuing to offer car loans of up to 90 per cent of the purchase price, although at interest rates of up to 3.88 per cent, up from an average of about 1.88 per cent before the new rules kicked in last week."

How is it that some companies do not fall under MAS regulations? Shouldn't the authorities plug the loophole? Good measures are only good if they can be 100% enforced.

With interest rate more than doubled from 1.88% to 3.88%, the cost of borrowing has become much weightier. I hope car buyers thinking of exploiting this loophole think and think again.

Take for example a 1.6 litre Japanese make with a price tag of $120,000. A 90% loan would mean a principal sum of $108,000. This is definitely not loose change.

A 1.88% interest rate over a 10 year period would mean paying $20,304 in interest. With interest rate at 3.88%, the same car loan would carry an interest payment of $41,904!

The interest payment over a 10 year period is equal to the annual earned income of some junior executives! Of course, we have yet to consider the running costs of a car.

Also, consider this. At the end of the 10 year period, the 1.6 litre Japanese car probably has a residual value of less than $10,000 (assuming an OMV of less than $20,000). This means that the car would have depreciated by more than 90%.

Total loss over 10 years: $151,904.

This is almost enough to pay for a brand new BTO 3 room flat in some parts of Singapore.

Related post:
Cooling measures for cars.

Sound Global: Lost 17.2% in a day.

Sound Global's chart looks bad and this is probably an understatement.

The black candle formed today is probably the ugliest I have seen in a long time. Gapping down and breaking through all the MAs, it was a headlong plunge.

Could we see share price sinking even lower from here? It looks like it could happen with the MACD diving steeply into negative territory and if it should happen, the next level of support is at 49c.

Fundamentally, I am concerned about the higher finance costs but they are not so destructive as to sink the company. It is still a very profitable company.

My estimate is that EPS could reduce some 20 to 25% this year, everything else remaining equal. If Mr. Market is unhappy with this, he could send share price back to test the low of May 2012 at 45c a share. With the estimated reduced EPS in mind, at 45c, we would be looking at a PER of 9x.

See Sound Global's financial statements: here.

Related post:
Sound Global: Full divestment.

Following comments in ASSI.

In the last few months, I received quite a number of emails asking me how could readers be notified when new comments are posted in ASSI. This is because, quite often, I would provide more information simply by commenting in certain blog posts.

For readers who visit my blog daily, the easiest way is to check the sidebar in the section labelled "RECENT COMMENTS".

For readers who only want to visit when there are new comments, go to the top of my blog and you will see, on the right, two small orange color boxes. These are RSS buttons. You could subscribe to all "Comments" and "Posts" by clicking on these.

For readers who only want to be updated when comments are made in specific blog posts, go to the blog posts, scroll down and you will see "Subscribe to: Post Comments (Atom)". Alternatively, if you click on "Post a Comment", you will come to a screen where you could post a comment and tick in a little box below "Email follow-up comments to XXXXXX".

Marco Polo Marine: The CEO speaks and the technicals.

I came across a recent interview with the CEO of Marco Polo Marine, Mr. Sean Lee. Although many things he said are not really news to me, it is still good to hear his statements. There are a few things he said which gave me a greater understanding of the company's competitive advantage and why they are well positioned to do better over time.

Of course, we know that the Indonesian Cabotage Law contributes to Marco Polo Marine's strong economic moat. This coupled with a shortage of OSVs in the country has put Marco Polo Marine in a strongly favourable position. This shortage is likely to persist with the Indonesian offshore oil and gas exploration growing at a faster clip as the government plans to have domestic oil production catch up with domestic consumption.

“As demand continues to grow, the industry can also be expected to move towards more complicated offshore exploration activities and to deeper eastern waters. This implies that there will be a sustained demand for rigs and as a result, more OSVs, indicating strong growth potential for our ship chartering business in the Indonesian offshore market over the mid to long term,” Mr Lee anticipates.

“However, the supply of OSVs in the Indonesian market has been limited due to the Cabotage rules which are stringently enforced. Currently, the Indonesian authorities allow only Indonesian-flagged vessels to operate in Indonesian waters. Among other regulations required of the company such as having to own a 5,000 ton gross registered tonnage vessel within its fleet, for vessels to be Indonesian-flagged, it has to be majority owned, i.e. 51 percent, by Indonesians. This thus creates a high entry barrier for foreign OSV operators,” he added.

The other engine of high margin growth for Marco Polo Marine is in ship repair, outfitting and maintenance. People may well wonder how come Marco Polo Marine's shipyard enjoys such a high utilisation rate and why they can do so well?

“About 90 percent of our ship repair, outfitting and maintenance works are performed for third parties. We see a very sustainable business for ship repairs in the longer term given the strategic location of the shipyard at Batam, which is less than an hour from Singapore, where hundreds of vessels pass through every day. As such repair and maintenance works are knowledge intensive as well as time and location sensitive, the Group can command better margins being shielded from low-cost competitors. Targeting medium-sized vessels have also helped us to differentiate itself from bigger players in the market. All the above factors have provided support to MPM’s financial performance despite the lull in shipbuilding.”

Credit is given to Ong Qiuying of Shares Investment for the interview with Mr. Sean Lee. To read the full article, see: Marco Polo Marine: Generating Growth Through Offshore Oil & Gas Exposure And Publicly-Listed Indonesian Subsidiary (22 Feb 2013).

Although Marco Polo Marine is fundamentally sound, the stock's technicals give me cause for concern as a negative divergence has clearly formed. Share price has been rising while volume has been reducing. Volume is the fuel that drives rallies. Without volume, the sustainability of any upward movement in price should be questioned. Lower highs on the MACD confirms a weakening of positive momentum.

I have sounded this cautionary note before, regular readers will remember. So, bearing the less encouraging technicals in mind, even as we stay positive on Marco Polo Marine's fundamentals, we must remind ourselves that there could be a chance to accumulate at lower prices. If I were to initiate a long position in Marco Polo Marine now, it would be a hedge. I wouldn't throw in everything including the kitchen sink.

Related posts:
1. Marco Polo Marine: Indonesian Cabotage Law (Part 2)
2. Marco Polo Marine: Insider buying continues.

Donate a book to the needy.

Some might remember that I was an Amazon affiliate. In fact, I mentioned it a few times before in my blogs as well. 

I decided to remove it. It is not as if people come to my blog to buy books, right? Also, it seemed like a lot of work to make a little bit of money which is not my blog's objective anyway.

Now, I am an affiliate of BetterWorldBooks which is a social enterprise. We have the option to buy pre-owned books which could otherwise end up in landfills or incinerators. 

We are helping BetterWorldBooks with programs to train teachers and build schools and libraries.

We are helping them to improve literacy amongst the underpriviledged.

I told a friend all these earlier when she giggled at the fact that for every book sold for $10.00 through ASSI, I get $0.50. So little, she said. 

Of course, some other companies might pay more commission but I like the idea that encouraging readers to buy from BetterWorldBooks is doing some good for other people who need a helping hand in life.

I was sent an email a few days ago to inform me that for every book that is purchased from BetterWorldBooks, a book will be donated to the underpriviledged. 

For every book we buy, pre-owned or new, some less fortunate child will be given a book. 

I really like this idea.

So, if you are thinking of shopping for books for yourself, family or friends, visit BetterWorldBooks to see if they have what you want and you will be doing good at the same time.

Related post:
Recommended books for FA and TA.

Sound Global: Full divestment.

Although its latest quarterly report does not inspire much confidence, fundamentally, this should be a sound business in the longer run.

China is bent on improving its infrastructure, including the improving of sanitation and increasing the availability of clean water supply. Sound Global is a logical beneficiary.

In the shorter term, however, it would be reasonable to expect margin squeeze and higher finance cost which would be a drag on performance. The rather sudden departure of its CFO is also a possible red flag.

Technically, momentum oscillators continue to trend downwards. The breaking of the rising 50d MA to the downside in yesterday's session was a bearish signal. Today, that signal was confirmed as a doji was formed below the 50d MA.

With momentum weakening and signs of distribution, we could see a lowering share price over time and the longer term 100d and 200d MAs tested for support. These are at 58c and 57c respectively.

There could be a better time to invest in Sound Global again some time in the future.

Related post:
Sound Global: Would I buy now?