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Year on year, Marco Polo Marine's ship chartering business enjoyed growth in revenue of 147.2% to S$39.3 million for the first 9 months of FY2013. It grew 234.6% to S$17.4 million in Q3 of FY2013 alone.
Ship building and repairs, unfortunately, weakened 52.3% and this reflects the issue of serious over capacities dogging shipyards everywhere.
The question to ask is whether ship chartering is able to pick up the slack and I think it is reasonable to expect that it would. This could be a good thing too as Marco Polo Marine's ship chartering business is a higher margin business compared to ship building and repair.
For the same 9 months in FY2012, ship chartering accounted for 22.7% of total revenue. Now, it accounts for 60.4%. If the malaise in ship building and repair should continue and it seems like it would, ship chartering would probably account for an even bigger share of total revenue especially with the contribution from the AHTS, MP Prevail, which was acquired in June 2013, kicking in.
This growth in revenue from ship chartering will gain momentum as Marco Polo Marine plans to buy another AHTS before end of the year if the opportunity should present itself. They are also building more AHTS in their own shipyard for delivery to BBR in 2014.
For the full FY2012, revenue was about S$ 90 million. For the first 9 months of FY2013, S$ 65 million in revenue has been recorded. So, the group needs to generate another S$25 million in revenue just to equal last year's performance.
It is likely that we will see ship chartering's revenue in Q4 exceeding Q3's S$17.4 million due to contribution from MP Prevail. Another S$0.5 million, perhaps? So, estimated revenue from ship chartering in Q4 could be in the area of S$17.9 million.
Unless ship repair generates lower revenue in Q4 compared to Q3, it is more likely than not that FY2013's overall revenue will equal FY2012's or maybe even exceed it by a bit.
Furthermore, due to the higher margins in the ship chartering business, I would not be surprised if net profit turns out to be higher in FY2013 compared to FY2012 despite a lack of overall revenue growth, exceptional gain of $5.7 million not withstanding.
Anyone who is investing in Marco Polo Marine must be willing to wait as the numbers are expected to improve significantly in FY2014. This means a waiting time of another 12 to 15 months.
Some numbers now for 9M FY2013:
EPS: 5.32c
NAV: 46.8c per share.
Gearing: 59.2%
Stripping out the exceptional gain of $5.7 million, what I believe to be a fair estimate of the EPS for the full FY2013 is around 5.4c. So, at 38c a share, we are looking at a PER of 7x. I don't think the stock is expensive. Given the probability of higher earnings in FY2014, definitely, it is not expensive.
Although I expect that the company is able to repeat a DPS of 0.8c in the next quarter given its cash position, it is perhaps more prudent to refrain from doing so given its current strategy to grow its fleet of OSVs more aggressively.
If there should be a decline in share price, I see support provided by the 100w MA at 37c. I would probably buy more if that should happen.
See media release: here.
Related post:
Marco Polo Marine: Bracing news from Indonesia.
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16 comments:
Hi AK
What I see here was the good management team that able to turn around from ship building/repairing to ship chatering.
As expected before, Q3 will remain flat, and will need to wait another quarter to see how is the contribution from MP Prevail....
Gregg
Hi Gregg,
Indeed. If they did not have the foresight to venture into OSVs in a big way early on, I think the company would have been sunk.
Now that they have gained a strong foothold as OSVs owner and operator, it is a matter of powering up their exposure which is exactly what they are doing.
I am looking forward to better results in the next one year. :)
Hi ak,
thanks for this blog post. A very detailed n clear analysis of Marco Polo Marine.
I am also waiting for the market to realise the potential of this stock. In my humble opinion, at present value, it is undervalued.
At the same time, i have purchased some shares of yongnam at 27 cents. At current price of 26.5 cents, it appears attractive n an opportunity to load up a bit.
HI AK,
I hope Mr Market will reward faithful shareholders of Marco Polo Marine soon. Marco Polo Marine result and P/E do not seem to have been factored into its share price. :(
P.S. I'm a vested investor myself.
Cheers
QL
Hi AK
Of course it came with the risk, it will be the nightmare if Indonesia lifted the cabotage principle.....
Gregg
Hi MissSimple,
Since you have no income, POSB might not be suitable for you unless you can be sure that you can fork out $100 every month.
As such, I would suggest you open a Standard Chartered Trading Account and buy 1 lot each time you have sufficient cash. Standard Chartered also have a lower commission fee compared to POSB, in exchange for more effort on your part to perform a 'BUY' transaction every time.
Hi Solace,
"It may move up toward its real worth today, next week, or next year. It may trade sideways for five years and then quadruple in price. There is simply no way to know when a particular stock will appreciate, or if, in fact, it will."
If we have bought shares of good companies at reasonable prices, we just have to wait. ;)
Yongnam's NAV/share is a bit more than 26c, iirc. If the opportunity presents itself, buying at under 26c a share would be very nice. :)
Hi QL,
Mr. Market does not care two hoots if investors are faithful or not. See my reply to Solace. ;)
Hi Gregg,
If that should happen, our goose would be truly cooked.
There is big amount of money in the PrePayment for MP Prevail and purchase new engines for vessels... I thought this expense should be recorded in Capital Expenditure rather than working capital?
Hi Gregg,
I think the people who can answer this is the management. I am sure you will share with us when you receive an answer from them. :)
Of course, if any reader has an answer to this, please comment. Thanks. :)
Hi AK71,
Sure, still waiting their reply, (slightly longer compare to previously). Maybe too many questions to answer.lol...
Gregg
Hi Ak,
Got the reply:
The “Other Receivables, deposits and prepayment” are in relation to the WIP vessels that we are building as per accounting principle.
The book value of MP Prevail is already captured in “Property, Plant and Equipment”.
Also includes the lead time to build one AHTS:
"End to end about 18 months for 8,000 BHP AHTS"
Hi Gregg,
Thanks for sharing this! :)
Hi AK
Some emails with MARCO:
Gregg
*******************************************
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.
Trust the above clarifies.
Best regards,
Chong Pin
Hi ChongPin
Any possibility to reveal when will be the MP Prevail delivery time to customer?
Could you provide us are all the chartered contract in USD or IDR settlement? Just wanted to know how does weaken Rupiah to hurt MARCO financial performance
Hi Gregg,
Very good to know. Thank you. :)
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