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Yesterday, I met up briefly with some friends. It was a very invigorating experience as we talked about value investing. When asked if there was a stock which I thought would pass any fundamental analysis on both quantitative and qualitative aspects, without hesitation, I said "Marco Polo Marine".
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| Massive shortage has resulted in a 15% to 20% AHTS charter rate premium in Indonesia . |
I have blogged extensively about Marco Polo Marine's business and why its stock was undervalued and how, even now, it is inexpensive. However, Mr. Market is a sentimental being and how he feels is more important than how he thinks. So, can we tell how Mr. Market feels about the stock?
I have mentioned about the glaring negative divergence in the chart a few times before and how anyone who should buy in then should be cautious enough not to throw in everything including the kitchen sink.
Since touching a high of 45c a share, the stock price has been drifting sideways with immediate support at 41c. Although volume is necessary to push price higher most of the time, it is not necessary to have volume to see price weakening over time, and volume has been very thin in the last month or so.
So, is this a good time to buy more of Marco Polo Marine's stock?
Although valuations are still very undemanding, I get the feeling that Mr. Market is waiting for a positive catalyst which could give the stock price a sugar rush.
In the meantime, we could expect some long holders to sell out their positions. Are they wrong to do so? Well, they could have found better places for their money or they could see with more clarity than I could that stock price is going to suffer a significant decline. Or they could have simply lost patience. There are so many possible reasons.
I like to think that a sideway movement in an uptrend is more bullish than bearish. When there is sideway movement, I like to look at the Stochastics which, in this case, seems to be turning up in oversold territory. Also, as the stock price formed lower highs, CMF has formed higher highs which suggests to me that smart money is still flowing into the stock even as its price seems to be stuck in the doldrums.
I told my friends that we should be brave and be invested. However, we should have a war chest ready. We could see share price lowering to test supports at 41c, 40c or even 39.5c where the rising 100d MA is approximating.
Having said this, there is no guarantee that supports would be tested. So, if we are still waiting by the side, this is a possibility that we have to accept.
Even though I have strong conviction, I remain pragmatic and if things should go awry, I have the resources to ride through the rough patches. Stay invested but stay prudent.
Related posts:
1. Stock picking: Spotlight on Marco Polo Marine.
2. Marco Polo Marine: Insider buying continues.
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16 comments:
nice post again! I have been monitoring nibbled a few lots of marco polo marine at 42cents.. hope with some patience this will pay off.. anyway yongnam and hocklianseng has weakened slightly and seems attractive.. what do u think?
Hi Wei Xiong,
Indeed, we can only hope to be rewarded for being patient. Whether we will be rewarded or not is harder to say. ;)
I like both Yongnam and HLS. Taking into consideration the bumper harvest of local infrastructural projects till 2030, both companies are logical beneficiaries. Current valuations are inexpensive.
In SeaShip News
Indonesian OSVs getting ‘notable increase’ in charter rates
Jakarta: While announcing its annual results local OSV operator PT Wintermar Offshore Marine noted how charter rates for offshore support ships have soared this year, following law changes.
The cabotage exemption for DP2 vessels, platform supply vessels (PSVs), AHTSs above 5,000BHP and diving support vessels ended on 31 December 2012. Wintermar said there has been a “notable increase” in charter rates for available Indonesian flagged vessels in these categories.
Wintermar saw net profit grow 23% last year to $20.2m. [01/04/13]
Hi letissier,
Thank you for sharing this. Much appreciated. This is indeed the expectation as revealed by my research so far. :D
Marco Polo Marine should be revealing 2nd Quarter results later this month and it could be the positive catalyst that Mr. Market is waiting for. :)
OSK DMG expects Exploration & Production (E&P) spending to increase 8% in 2013, 10% in 2014. This is because oil price is at the “upper bound of oil majors’ comfort zones” and history has demonstrated that this leads to increases in exploration & production budgets, the analysts say.
With this is mind, demand for OSVs is expected to remain strong on rig orders. OSVs are typically ordered 12-18 months after rigs, and the strong rig orders of the recent two years is sending the OSV market into an upswing. Industry players still see strong demand for additional rigs, and the OSV fleet was described as being “at replacement requirement” and “bullish on new orders”, the report notes. The analysts prefer the small caps because of valuation and is neutral on both Keppel Corp and Sembcorp Marine because of strong overseas competition.
Marco Polo Marine is a key beneficiary of cabotage regulation in Indonesia. The implementation of cabotage rules in Indonesia has forced out a fifth of the AHTS vessel supply, causing rates to jump. As a result, charter rates are at a 20%-30% premium compared to rates elsewhere.
The EDGE, 12 April 13.
So OSK DMG had fired the first buy call on this gem. Although not a direct call but a menton of MPM as ONE of the potential beneficiaries of the uptake in the O&G industry. DMG & partners is the 2nd biggest holder with 34 million shares which is about 9.98% of the total share holding.
OCBC has a list of O&M counters with MPM listed as a "buy". Not surprising, OCBC Sec is the 9th biggest shareholder with 4.4 million shares which is about 1.29%of the total share holding.
There should be more calls coming from other houses and maybe nearer to the release of the quarterly result and probably with a win announcement thrown in.
MPM should pull some PR stunt like Ezion with trading halt and off-trading time announcement. I am sure this will get Mr Market attention that it deserves.
Hi seefei,
It is a matter of time before the share price of Marco Polo Marine goes higher. In the meantime, any pull back or, indeed, a correction, would be buying opportunities. :)
Good2, dont run away first. Let me buy more at <NAV of 44cts LOL. AK, any idea when is the AGM? Should have some good figure to show. I checked MPM website but no announcement yet of the next AGM.
Hi seefei,
I estimate the next financial report to be available towards the end of this month. I am also expecting earnings to be higher. :)
interesting selldown today near the end of the day.
was queuing at 41.5c and not expecting to get any action but got my order filled and selling pressure pushed it down to 41c
this made me relook at my chart and i feel if the 41c support is broken, we could see a downtrend forming...
your thoughts?
Hi Sanguine,
You were not expecting to get any at 41.5c but are you happy you did? ;)
My overnight buy order at 41c was filled and I am happy. Fundamentally, 41c is still cheap.
Technically, the support at 41c has yet to be broken. If it should break, the rising 100d MA should provide support at about 40c.
Dear AK71,
First of all, I would like to thank you for sharing your valuable thoughts through your blog. I have been following your blog for more then a year now and greatly inspired by your posts.
I have bought some MPM shares after reading your posts on MPM and have been holding it for a few months.
Indeed, patience is a virtue of value investing as I read value investors are always early when buying into a undervalue stock.
Recently, MPM has announced employee share options and BBR 1st quarterly results.
I see EPS for BBR seems to have doubled in the report.
I would like to hear your insights on the announcements.
Looking forward for your reply.
Thank you. :)
ozxinvest
Hi ozxinvest,
The employee share option is a way the company rewards its employees and does not seem out of order.
BBR's results are really within expectations and since Marco Polo Marine has an almost 50% stake in BBR, the positive development in BBR will lift Marco Polo Marine's results.
Apart from earnings, we should also see Marco Polo Marine's NAV/unit increasing significantly from BBR's successful listing earlier this year.
Whether all these developments will translate into higher share price for Marco Polo Marine is much harder to say.
Hi AK71,
Thank you for your fast reply.
I have emailed MPM for the results release date, this is the reply:
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Thanks for your email.
We note your kind comments.
In view of board of directors schedules as well as other considerations, we announce our results after market close to allow for time for analysis by market participants.
For the upcoming Q2 FY2013, we expect to release it after market close on 9 May 2013.
-----------------------------------
Maybe a special interim dividend to reward shareholders for waiting? :P
Hi ozxinvest,
I doubt that there would be any special or interim dividend. Of course, I won't mind a pleasant surprise. ;)
Thanks for sharing the reply from Marco Polo Marine with us. :)
Hi AK71,
Not a problem at all, this is one thing I learnt from you - Sharing!
Have a nice day!
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