Posts
Today, Marco Polo Marine's share price rose significantly on the back of much higher volume and the recent visit by a group of investors to the company's yard in Batam could have something to do with it:
Last week, we brought a group of investors to MPM’s Batam yard. We saw all three drydocks busy with repair operations, and the construction of a third-party 8,000bhp AHTS vessel and two similar vessels for its own fleet. In preparation for better shipbuilding times, a new slipway is almost complete. Investors were most interested in the company’s 20% net margins.
MPM and associate PT BBR are on the cusp of renewing their AHTS charters, with current contracts expiring in September to November. With AHTS supply still trailing far demand in Indonesia, we are highly confident that each vessel will be re-chartered immediately at prevailing market rates, which are 33% higher.
Source: OSK-DMG, 25 Sep 2013
Good things come to those who wait.
Related post:
Marco Polo Marine: Will FY2013 better FY2012?
Bloggy Award
151 comments:
Hi AK,
In your previous post, it was mentioned that 34 cents was a steal and I added 35.5cents was still a good discount to value.
Today, we see weighted trade at 41cents, 1 cent higher than the closing 40 cents. Hopefully the rally continues and Mr Market favours this counter more.
CMF is positive, on a high volume. However, RSI is showing over bought which might prompt some retailers to cash out for a gain.
Exciting times ahead for sure :)
Perhaps your conservative calculations of 48cents made months ago might actually come true!
But as we all know... Mr Markets doesn't give a hoot to what we think :)
Continued good luck to all invested :)
Hi AK
Do you think shipping counter is able to trade premium price over the book value, since 2008 economy crisis, a lot of shipping counters are actually trade their below book value... TP$0.61 vs book value $0.45 is like 30% premium.... Very unlikely but I hope it will come true... Lol
Gregg
Hi Solidcore,
At 34c a share, Marco Polo Marine was very cheap. Even now, it isn't expensive at 40c. It should be worth more. :)
48c would be a fairer price. Of course, it doesn't matter what I think. Mr. Market doesn't care 2 hoots what I think. You are right. ;p
Hi Gregg,
I think it is possible and it has happened before but it has to be during a very bullish phase in the cycle. Are we in that phase now? Maybe. I don't know really.
Marco Polo Marine could trade at 12x PER then. If we project EPS to be somewhere in the region of 7c in 2014, then, the stock could trade at 84c a share. ;p
84 cents ! You get me excited like an electron.:P
Hi Cory,
You so atas!
Warren Buffett says oversexed guy in a harem. You say electron! ;)
Well, it certainly could happen if EPS rises to 7c in 2014 and, perhaps, even higher in 2015 as a few more AHTS enter into service.
In a more bullish phase of the shipping cycle, when there is plenty of optimism with expectations of more growth, related stocks could trade at higher PERs.
I don't have a crystal ball, of course. This is what I see in my bowling ball. ;p
i am still holding tight.
AK, remember vard holding?
when u post it that time, i also said it is good.
i get it 79 cent and able to sell at 96 cent.
i hope marco polo will be like another vard holding.
Hi yeh,
I remember. We made some pocket money from Vard Holdings. :)
We can only wait and see if Marco Polo Marine has the same kind of fortune. Good luck to us all. ;)
Hi AK,
I am also a fellow shareholder of marco polo marine. Still holding on and remain optimistic of its future.
At the same time, US will be requires to raise its debt ceiling by 17 oct or else they will have to default on their loan. i expect stock market will be turbulent until then. I am of the opinion that debt ceiling will,be raised like what happen in the past. May consider to pick some stocks when the pricing comes down. i will purchase more when pricing becomes attractive again. :) e.g STI falls to 3000
Hi Solace,
I am not very good at telling what will happen in future. If I should try, I would probably be wrong half the time and that is being optimistic. ;p
It is hard for me not to be optimistic about Marco Polo Marine's future although I always say we must avoid being optimistic or pessimistic. :)
Having said this, a 48c to 50c price target is not optimistic, I feel. Instead, these are realistic prices. Of course, what I say does not count. ;p
Indonesia needs to raise its oil production after years of production decline.
The country turned from a net oil exporter to a net oil importer in 2003 and has been a net importer since then.
In 2008, it implemented cabotage rules requiring O&G works such as O&G surveys, drilling, offshore construction, offshore support services, dredging and salvage works to be carried out by Indonesian-flagged vessels, which will be phased in progressively from 2013 onwards.
In our view, asset localisation, thanks to the cabotage ruling, will drive a re-rating phase as earnings visibility rises and asset owners move up the value chain from tugs/barges to AHTS/PSV and eventually rigs, raising long term earnings visibility for the
Indonesian players.
The aggregate P/E valuation for Malaysian O&G companies was only 8.7x at end-2005 but has averaged to more than >20x in the past three
years and we expect a similar re-rating phase for Indon O&G stocks. Marco Polo Marine is a key beneficiary of this theme...
Source: OSK-DMG.
--------
Wah! PER of 20x? Assuming that Marco Polo Marine's EPS grows to 7c and stops growing, we could be looking at a share price of $1.40 in the coming years? Wah!
Hi AK
Seem like only OSK-DMG has interested on this counter, i don see any other brokerage house has the similar report on Marco. Anyway, we are happy to see the such analyst report to Goreng the stock. Will it become next Blumont.. ? lol…
Gregg
Hi AK
$1.40 is almost 3-4x book value, will market trade a such huge premium price? We shall wait and see....
Gregg
Hi Gregg,
I think OCBC was covering this until recently too.
Actually, I don't mind having less analyst coverage. Peter Lynch says to look for stocks with very little or no analyst coverage. ;p
The stock is undervalued. The potential is easy to see. The execution is smooth. Insiders have a big stake. The management are incentivised to perform well.
"Patience is sometimes the hardest part of using the value approach..." From: Little Book of Value Investing.
The industry is cyclical in nature. At the peak of the cycle, a PER of 12x is not unthinkable. So, with expected EPS of 7c, we could see 84c a share in the next 2 years. I think this is being realistic, not optimistic.
Even if we were to use trailing 12 months EPS of 5+c, at 12x PER, we are looking at 60+c a share.
Patience will be rewarded. :)
Hi AK
Kinda strange that the annual report for FY13 is still not out yet...y??
Hi Gary,
The last results announcement was in August. So, I suppose the next one could be in November.
Of course, you could always send them an email to find out. ;)
...the global economic turmoil should not be affecting the long-term plans in the offshore and marine industry, which is essential to the energy market.
John Rowley, president of Lloyd's Register Asia, said: "The investments are already secure and already committed in the shipyards. 200 offshore platforms including drill ships will be built in the next five years."
With conventional sources of fossil fuels being exhausted, new rigs must venture to previously untapped sources in deeper waters and more hostile environments.
http://www.channelnewsasia.com/news/business/singapore/more-talent-needed-in/851396.html
Photos and report:
A visit to Marco Polo Marine yard in Batam.
Hi AK,
It has been 3 months since we asked IR about MP Prevail and still no announcement yet. :(
Gregg
Hi Gregg,
It could be that MP Prevail has been quietly deployed. Stealth mode. ;p
Saw the photo of MP Prevail in the link I provided earlier? Looking smart! I think Marco Polo Marine gave it a new coat of paint. Bright orange. The original color was black, I believe.
The photo was taken when a group of investors visited the Batam yard last month.
Deployment is a matter of time. If Mr. Market should suffer from another bout of anxiety and push the share price down to 34c again, I will be buying more. :)
Hi
Maybank just give Nam Cheong price target $0.37 which translated to 9X PER base on 2013-2015 EPS ...
This also indicated how Undervalue Marco Polo is compare to other peers ..
Gregg
Hi Gregg,
Even after stripping out the exceptional gains, at 9x PER, Marco Polo Marine's fair value is about 48c and this is 12 months trailing PE, of course.
Since we are investing in the company's future, it makes sense to use future earnings in our calculations. So, expecting the company to benefit from higher OSV charter rates in 2014, even a conservative EPS of 6c will give a fair value of 54c a share at 9x PER. This is not being optimistic. It is realistic.
hi AK,
BBR just released the latest quarterly report, not doing well...
only profit +1mil.
9months ended Sept: http://www.idx.co.id/Portals/0/StaticData/NewsAndAnnouncement/ANNOUNCEMENTSTOCK/From_EREP/201310/6f7bc48054_28e6ef37fa.pdf
6months ended June: http://www.idx.co.id/Portals/0/StaticData/NewsAndAnnouncement/ANNOUNCEMENTSTOCK/From_EREP/201307/5990a11131_6262d7613b.pdf
Hi Gregg,
The gestation period is longer than expected, you think?
I am willing to stay invested for at least 2 years and see if the management delivers.
HI AK,
Time to accumulate more.. :).
Just got the reply from Marco Polo IR Officer, Quarterly (End-Sept) will be released on 26th Nov.
Hi Gregg,
Actually, I quite like the results. Balance sheet a bit weaker which is to be expected but earnings improved tremendously.
Barring unforeseen circumstances, Marco Polo Marine should be on track to deliver stronger earnings in the next few months.
Profit +1 mil?
Thought i saw profit for 2013 dropped 1 million from USD$5.8m (on the right hand side) to USD$4.7m (on the left hand side)?
Hi letissier07
I did not compare YoY or QoQ, just look at lastest quarter and it only earn 1mil+.
Revenue growth did not catch up with increasing of operating expenses.
HI AK,
Any accountant expert here, how to calculate the contribution of BBR to Marco revenue/profit.
Below is reply from Marco.
*************************************
MPM consolidates BBR’s results from accounting perspective as it has deemed control of BBR.
MPM currently own 49.6%. If you gross up the minority interest by a factor of about 2 twice (100%/49.6%), you will be able to estimate the contribution of BBR to MPM’s results.
Best regards,
Chong Pin
Hi Gregg,
The accounting nitty gritty is beyond me. :(
I guess I will wait for Marco Polo Marine's results end of the month.
HI AK,
I looked back the BBR result and redo the calculation, realized that i was giving wrong number in the previous comment. (it is not 1mil profit for the quarter, correct one is $160k).
BBR (1st 3 quarters result)
Q1 $2,291,201.00
Q2 $2,332,337.00
Q3 $160,316.00
(Again, sorry for the mistake.)
Hi Gregg,
Hey, thanks for sharing your findings. :)
AK,
Side topic, for your entertainment.
Marco Polo Chairman (Lee) going to marry with celebrity Vivien Hsu..
http://ent.163.com/13/1103/07/9CO7V7VC00031H2L.html
Aiyoh, Gregg. You gave me a shock!
That is the CEO lah. The chairman is his father. -.-"
For a while, I was worried... -.-"
Oh ...Pahseh pahseh ...hope he can focus on chartering out MP Prevail while preparing his wedding...haha
Hi Gregg,
A wedding on board an AHTS? Wah! Definitely a unique experience. LOL.
Hi AK ,spent another weekend in checking contribution of BBR to Marco,we can say it is not so significant... It was associated company and became subsidiary after listing... So we just check back previous quarter under "share of associated company" in the income statement.....
Just wonder MP Prevail is under BBR or Marco ?
Hi Gregg,
If I remember correctly, Marco Polo Marine holds about half share of BBR and MP Prevail was purchased by the latter. That is the way to comply with the cabotage laws in Indonesia.
Hi
Pacific Radiance IPO trade at 1.5X bookvalue and PE 15-16..marco is too undervalue compare to this...
Hi Gregg,
I saw that too.
With those numbers, Marco Polo Marine should be trading at 69c to 75c a share. LOL.
However, I am more inclined to believe that this IPO is overpriced. :)
My net-friend told me that they can see a lot of ships idling when they biking at ECP... Looks like shipping industry need longer time to recover ..
Hi Gregg,
That means more maintenance work for Marco Polo Marine? ;p
Haha ...you are right ..The brighter side
Hi Gregg,
Haha.. Well, it was a bit of a tongue in cheek comment. ;p
Radiance is a bigger outfit compared to Marco Polo Marine. So, it is probably in a different class and valued higher.
Marco Polo Marine has lots of potential to do better and I can only hope that they deliver.
In the meantime, I will have to cut the CEO some slack since he is going to be busy with his celebrity wedding. ;)
HI AK,
Good resulted from Marco Polo and 1.4cents dividend was another big surprise.
The most exciting new was MP Prevail is already in 100-Day charter since last month. Expected to see more chartering revenue in Q1 2014.
Email exchange with the IR:
*****************************************************
I am happy to see the quarterly report and would like to check with you on the below questions.
1) Declared Dividend 1.4cents, cash needed to fund dividend is $4.7mil and cash on hand only $7.3mil, definitely this is going to deplete the cash... what is company view on this? Does the company think that coming quarter will have stronger positive cash flow? I have some concern on the dividend that funded by Debt which is not sustainable.
2) Any update on the MP Prevail?
3) Any special reason why suddenly income tax jump up in Q4
Reply:
1) The Board has considered the balance sheet and cash flow position and taken into account the salient factors including our EBITDA generated.
2) MP Prevail has been on a 100-day charter last month. All our vessels are on charter or pending imminent mobilization except for Vantage which is being evaluated and inspected for potential charters in Dec 2013.
3) On an annual basis, the effective tax rate for FY2013 is very much in line and in effect lower than FY2012. It is not as drastic as a “jump” in income tax for Q4, just that we took a more pro-active view on income tax this quarter with auditors being aligned with the same opinion.
Hi Gregg,
Thank you so much for sharing the good news and also your email exchange with Marco Polo Marine's IR department. Much appreciated! :)
This has certainly put a smile on my face as I struggle to keep my eyes open. Really tired from my trip. -.-
I haven't had time to read the reports yet but 1.4c per share in dividend is really a very nice surprise. I agree.
I would have thought that a lower DPS would be more prudent given the high CAPEX requirement as the Company push ahead to expand its OSV fleet.
Well, I suppose I shouldn't complain if I am being paid (more) to wait. ;p
HI AK:
Follow up email:
Marco Reply:MP Prevail has been on a 100-day charter last month. All our vessels are on charter or pending imminent mobilization except for Vantage which is being evaluated and inspected for potential charters in Dec 2013.
Q: Pertaining to this, can I say that MP Prevail was only chartered out in OCT which the revenue likely only incur in Q1 2014?
100-day charter sounds quite short period, will marco face any issues to charter it out after that.
Ans: Yes it is. Started in Oct 2014. It is also maiden charter so 100-day is a good start and no teething issues.
There are only about 8x8,000 BHP modern AHTS which are Indonesia-flag.
We have already started to market this vessel. Our track record in chartering out vessels should provide the comfort of our ability to secure charters.
******************************************************************
Q:How is the charter rate for 100-day compare to longer term? higher revenue or lower revenue?
Ans: It is at a comparable rate, bearing in mind we acquired MP Prevail at a very reasonable price.
Q: How many are belongs to Marco Polo (BBR) out of 8x8000 BHP modern AHTS other than MP Prevail.
Ans: We own 3, Premier, Prelude and Prevail.
Q:Maybe you can share with me more on macro economic perspective, any special reason why Marco are concentrate more on the 8000 BHP market as i understand there are another two more ships under construction in the Batam shipyard. Is it due to higher premium or better profit margin?
Ans: The oil concessions in Indonesia being offered are now more towards eastern waters which are in general deeper and rougher.
The oil rigs operating at those waters are also moving towards larger ones which necessitates bigger AHTSs.
We take into account charter rates, risk, sustainability and sub-segmental AHTS demand/supply dynamics.
Maybe CEO need dowry for the marriage that is why higher dividend was announced.
lol....
Hi Gregg,
Thanks for this. Marco Polo Marine's management shows not only competence but also savvy.
Our patience will be rewarded. :)
Hi Gregg,
Wah! You have a good imagination! Why not include that comment in your next email to the IR department? ;p
Marco Polo Marine (MPM) posted in-line 4Q13 results yesterday, with 4Q13 PATMI up 9% to SGD4.2m, bringing FY13 PATMI to SGD22.3m.
Due to a one-off revaluation gain of SGD6m in FY13 and a SGD1.1m receivables provision, core PATMI actually fell to SGD17.8m from SGD20m a year ago, but we believe that this has already been factored into the depressed stock price.
Net gearing is 60%, which is acceptable for a fast-growing small company.
The big surprise was the 1.4 cent dividend declaration, handily beating our 0.8 cent forecast, signalling management's optimism for the coming FY14F.
We believe that MPM's AHTS vessels in Indonesia have been rechartered from USD1.50/bhp/day to about USD2.0/bhp/day which will boost margins and income.
The stock is trading at a P/B of only 0.8x and a FY14F P/E of 5.1x, and the yield is attractive at 3.7%.
We currently have a BUY recommendation with a TP of SGD0.61 based on 8x FY14 P/E, with revisions pending an analyst briefing later today. (Lee Yue Jer)
That is from OSK ...I am also waiting for their detail report...hehe ..
Hi AK,
I relook Marco FY result and found out that they actually added in Finance COst ($5,006,000) into operating cash flow which inflated the FCF (they trying to reclass finance cost into FInance Activity).
Then, 2nd number on the interest cost, FY2013 $5mil vs profit $21mil, is like you are running business, you make 4dollar then pay 1 dollar for the interest, sounds *BohHua* ...(interest cost expected to be higher in FY2014 after drawing $50mil from the MTN).
Could you share with me what is your thought?
Gregg,
(Vested)
Hi Gregg,
Credit is the lifeblood of most businesses. If leveraging will lead to higher EPS (i.e. it is EPS accretive), I will support it.
Marco Polo Marine has increased its gearing level to 0.6x, if I remember correctly. In order to grow its OSV fleet, leveraging is a necessary evil.
If the other 2 AHTS which are under construction are deployed in 2H 2014, we will see numbers improving once again, everything else remaining equal. :)
Hi Ak
Thanks for the comment, let see how does MP Prevail contribute to Q1 2014,and from the number we can make an estimation on the 2 AHTS that under construction....
Hi Gregg,
I think we can take the cue from insiders. :)
In one of my earlier blogs, I mentioned that a lower DPS would not surprise me because of the higher CAPEX requirement as the company expands its OSV fleet.
With a much higher DPS declared, it not only surprised me but it also indicated to me that the management is confident that its earnings will improve in 2014.
I will hold on to my investment in Marco Polo Marine in anticipation of better numbers in the next 12 months. :)
Hi AK
Some "insider info" to share with you, Marco IR had given me their contact and i made a call to them to get some information.
1) MP Prevail: Daily rate is USD 16900 (not too sure the technical term that he explained to me, but the thing is this vessel will be treated as 8000BHP even it is 9000BHP), so the rate is above USD $2/day. Valuation of this vessel increase to 24.5mil from the purchase price about US$18mil. That is the reason why we see NAV value was increase to 47.8cents.
2) MP Prelude and Premier (sister vessel, both 8000BHP) are re-charter to another client with 25% increase in term of contract value. (one was delivered last month and another one will be this month)
3) Bunker business (Under JV) is breakeven, no expansion plan at the moment due to stiff competition.
4) Marco is expecting increase of capital expenditure in coming quarters to grow their business. (need more patience to see FCF turnaround).
************************************
We should see good earning from Q1 (with Full contribution from MP Prevail and partial contribution from Premier/Prelude). *Disclaimer: this is from my comment, not from Marco.. lol...
Hi Gregg,
Thanks for sharing this valuable information with us here. Much appreciated. :)
Marco Polo Marine bought MP Prevail at what some called a distressed price. So, the ROI on that vessel will be impressive.
Next quarter will see better numbers due to better OSV charter rates, I believe.
More CAPEX is to be expected as the company grows its fleet of OSVs. I feel that the fleet needs to grow more rapidly.
It is good that there are 2 more AHTS being built in their Batam yard but the leadtime required is a bummer. I hope another MP Prevail deal comes along in the next 3 to 6 months. ;p
Hi AK
On accounting portion, depreciation value will be base on $18mil or the new valuation price $24.5?
Hi Gregg,
Since they have valued the vessel higher. I believe that depreciation will be based on this new value.
Off track for abit...Just realised that the covering OSK DMG analyst Lee Yue Jer used to work for Marco Polo.
Hi lettisier,
He interned there in his undergraduate days, if I remember correctly. He wrote a research paper on the company too. Definitely in the know. :)
Hi AK
This one?
https://www.iveycases.com/ProductView.aspx?id=51366
Do you have the copy?
Hi Gregg,
I read it last year. It was available for free (with disclaimers). Unfortunately, I did not print a hard copy.
Anyway, it is outdated by now. :)
Marcopolo's Indonesian associate BBR reported today MP Prelude & Premier were both successfully chartered out for 26 months & 13 months respectively, for a total of USD 20 million. They also announced the plan to buy back upto 10% of the shares (only 25% free float):
http://www.idx.co.id/Portals/0/StaticData/NewsAndAnnouncement/ANNOUNCEMENTSTOCK/From_EREP/201312/5df19de297_ca6ef92ac6.pdf
http://www.idx.co.id/Portals/0/StaticData/NewsAndAnnouncement/ANNOUNCEMENTSTOCK/From_EREP/201312/87cf2cc340_0903e3cc4a.pdf
http://www.idx.co.id/Portals/0/StaticData/NewsAndAnnouncement/ANNOUNCEMENTSTOCK/From_EREP/201312/3a8ebeac36_260d41ad48.pdf
Hi Ryan
U might interested to see this report from OSK http://www.remisiers.org/cms_images/research/Dec16-Dec20_2013/1219_OSK_Morning_Matters.pdf
Gregg
Hi ryan,
Thanks for the links! I need all the help I can get to catch up with all that has happened while I was on vacation since I make it a point not to look at the stock market while on vacation. :)
Hi Gregg,
Thanks for the link. Much appreciated. :)
Seven more 8,160bhp AHTS vessels to join fleet over FY14-15F. MPM will be growing its AHTS fleet, capitalising on the strong returns available to Indonesian vessels in the cabotage-protected offshore space.
We understand the current planned delivery schedules are May 2014, Aug 2014, Jan 2015, March 2015, June 2015, July 2015, and Sept 2015.
Vessel prices have jumped 15% since the start of 2013, following a >35% charter rate jump over the last 18 months.
OSK DMG, 19 Dec 13.
Hi AK
Thanks for the effort,I should write down the OSK keynotes instead of giving u the link.... Hehe ..
(was using smart phone,actually difficult to.copy and paste)
Hi Gregg,
It is a good write up and I only cut and pasted what really caught my attention. ;p
Hey, you are keeping me updated. So, I should be thanking you! :D
Hi AK
If I remember correctly, previously OSK target price was $0.61 but this time reduced to $0.55.
AGM will be scheduled by end of Jan, hopefully they can have presentation slides touch more on expansion plan....
Hi Gregg,
I have learnt that the target prices are rather iffy. LOL.
Anyway, my target price is somewhat conservative. If I remember correctly, it was 50.5c in one of my earlier blog posts. ;)
HI AK
Actually I hope marco can issues right to support the expansion rather than taking debt.....
Hi Gregg,
If they have access to cheap debt, I rather they grow by taking on debt.
With share price trading below NAV, I feel that it is relatively expensive for the company to do a rights issue which has to be at a discount.
Of course, if they should do a rights issue, I will be taking part. :)
Another email exchange:
1) The crews who operating MPM AHTS (eg: MP Prevail, Premier, Perlude) are belongs to Marco or client? They belong to us, i.e. in this case, in BBR’s balance sheet.
2) Is Nam Cheong considered as competitor to MPM? It just announced going to seel 3 AHTS to its jointly controlled entity, PT Bahtera Niaga Indonesia (reference link: http://infopub.sgx.com/FileOpen/NCL_News_Release.ashx?App=Announcement&FileID=269248)
I cant comment much on other companies.
They mainly serve the Malaysian markets and supervise or out-source vessel building to China.
With regard to AHTS chartering business, they are in similar business then but their vessels are mainly Malaysian-flagge.
Hi Gregg,
Thanks for sharing this. :)
With regards to Nam Cheong, I have thought of this before. I believe that their strength is in Malaysia and they are trying to get a slice of the pie in Indonesia now as the AHTS chartering business is more lucrative.
Marco Polo Marine's position in Indonesia is entrenched. Their Indonesian entity is, de facto, family controlled. BBR has a proven track record.
Nam Cheong is a dragon in Malaysia but even if they are bigger overall, in protected Indonesia, they will not be creating big waves. Well, at least not in the near future. :)
It could be a good idea for Nam Cheong to think of ways to work with Marco Polo Marine instead, to their mutual benefit. The synergies are there to be realised.
NamCheong sold 3AhTS to PT Bahtera Niaga Indonesia, I think those vessels should flag indonesia since the company is Indonesia registered which meant in other word competition is started heating up now. I think is time (hope) to find out who is the customer to find out are they targeting the same customer base.
OTTO MARINE,ASL Marine ,NamCheong all stock price are chionging except Marco ....lol
Hi Gregg,
Money will go to where it is treated best and there is no doubt that the AHTS chartering business is a good place in Indonesia now. :)
The pie is probably big enough for more players. The much higher rates in the country is evidence of this. Marco Polo Marine won't be deprived of its share. Not in the near term, anyway.
As for its share price, Marco Polo Marine is probably a laggard. That doesn't bother me much as long as the company does well. :)
I hold some share directly in BBRM which is subsidiary of Marco Polo in Indonesia. There is hardly any interest for OSV stocks here although they have posting record breaking margin and growth. For example BBRM now is selling at FY13 PE 6x and PBV 0.6x. Their tug and barge business is hampering their profit margin.
Regarding the growth of OSV in Indonesia there are several companies now listed or joining forces with SG companies.
Logindo - subsidiary of Pacific Reliance owns 56 OSV of which 3x5000 bhp AHTS, 1x8000 bhp AHTS & 2 new 12,000 bhp AHTS. Currently selling for PE 10x. Gross margin 50% net margin 29%.
BBRM - Subsidiary of Marco Polo, 1x5000 bhp AHTS, 3x8000 Bhp AHTS.
Wintermar - Join venture with POSH Semco owns >60 OSV, biggest player. Own 3x5000 bhp AHTS and 2 new 8000 bhp AHTS. Trading at PE 8x, PBV 1x
Coming soon will be subsidiary of ASL marine with 3 new 5000 bhp AHTS.
These 4 companies owns >50% of all modern AHTS in Indonesia.
Future plan FY14
BBRM - Indicated they will add 1.5 AHTS per year, is current laggard with only 1 added in 2013. Expect 2 AHTS next year.
Logindo - added 3 x AHTS in 2013 and another 3 in 2014.
Wintermar - Added 3 AHTS and 9 other OSV in 2013 and plans similar in 2014
ASL Marine - Plans to add 3 AHTS in FY14.
The major problem with Marco Polo is they are too slow and their expansion plan is muted, leading other to capture the overall pie.If they don't move faster all the lucrative contracts will be taken away...
The rates in Indonesian is current very good at USD2/bhp and rising.
Hi Gark,
Can share with us how you get the relevant information? or are you working in that industry?
Hi Gark,
This is very good information. Thank you very much for sharing. :)
Yes, I feel that Marco Polo Marine is moving too slowly too. They seem to be too conservative. Although it is more economical than buying new, it takes 18 months to build an AHTS in their own yard.
So, although in the near term, Marco Polo Marine will continue to do well, if they continue to expand too sluggishly, they will fall behind.
Therefore, I am rather pleased when OSK DMG reported that the company plans to have 7x 8,160 bhp AHTS delivered.
The planned delivery schedules are May 2014, Aug 2014, Jan 2015, March 2015, June 2015, July 2015, and Sept 2015.
So, 2 to be added this year. 5 to be added in 2015. Encouraging but still a bit slow, perhaps.
Yes i read the OSK-DMG report, however in Indonesia their subsidiary BBR guided for 1 more vessel for next year only.
FY11 - added 2x8000 bhp AHTS
FY12 - None
FY13 - added 1x9000 bhp AHTS at 3Q
FY14 - ?
Hi Gark,
Sounds like this is a mission for Gregg!
Gregg has been writing to the IR department at Marco Polo Marine. I think they are probably on first name basis by now. ;p
Hi Gregg,
I think we are fortunate to have someone who knows the industry so well in Indonesia who is willing to share. :)
Would you like to write an email to Marco Polo Marine to ascertain details Gark has shared regarding BBR's plans?
Hi Tan,
All the information is public from the respective companies of which 3 OSV charterers are public listed in IDX.
Mostly gathered through their corporate presentations.
The AHT, AHTS, PSV, Crew boat and Accomodation work barge is currently in very high demand in Indonesia due to cabotage. More than 10 companies here are all adding OSV vessels, but most only adding 1-2.
This is like the gold rush during the internet boom times. Everyone wants to get a piece of the cake. The biggest and most efficient will end up as the winner.
In 2014 new cabotage laws will affect DSV (Diving support vessels)of which there are current <5 in Indonesia.
In 2015 cabotage laws will affect FPSO, semi submersible and jack up rigs.
Hi Gark,
Thanks for sharing with us on the extent of the Cabotage Laws in Indonesia. Sounds like a proverbial gold mine, indeed.
Which companies in Singapore do you think will most benefit from these developments?
Ak,
Currently Indonesian companies does not have the financial resource to take up all the cabotage induced OSV volume.Also Indonesian OnG capex is growing 20-25% per year as the government issue more and more concessions. According to infield system, projected OnG Capex for Indonesia mostly in offshore.
2013 - 2.6 bil USD
2014 - 3.2 bil USD
2015 - 3.0 bil USD
2016 - 3.7 bil USD
2017 - 6.8 bil USD
The only listed company in Indonesia with 1 jack up rig, 4 swamp barge and 1 FPSO is APEX. They will benefit once 2015 cabotage comes.
Logindo (Pacific Radiance) and Wintermar both have DSV already and has indicated they will move upmarket with the cabotage.
Oh forgot to mention Apex is subsidiary of Mira International Holdings Pte. Ltd.
Hi Gark,
It would seem like the party for Oil & Gas related companies in Indonesia will last for many years to come.
I think we can expect more good news for companies in Singapore which have moved into this space. :)
Yes.. provided they can catch up with their competitors...
Gross margins >50% is too good to pass up, which business is so lucrative?
Hi Gark,
You are absolutely right.
I remember in my early readings of Warren Buffett's methods to pass on businesses with GP of less than 20%. 20% to 40% is good. Above 40% is mouth watering!
Of course, looking at GP is only one of the first steps but an important one. :)
Hi AK / Gark
Maybe we can get Gark to write a guest post on Indonesia OSV market. He might have better understanding. Lol.
Just send in email to MPM asking on the expansion plan. Will keep the team update.
Hi Gregg,
You know I am always on the lookout for guest bloggers. I hope Gark is interested enough to do this. ;)
Haha thanks for the offer, I am not an expert by any means, just an investor.
My, my, seems like every single company in Singapore also trying to get a piece of the Indonesian OSV pie.
Vierlines – Ottomarine partnership reflaging 3 AHTS to Indonesia flag in end of the first quarter 2014. Principal business agreement both founder Vierlines and Ottomarine bring mutual benefits and business development in Indonesia, to answer the challenging business demand in oil and gas sector both party agreed to reflaging AHTS Deep Sea 1 (21.000 BHP) Go Rigel (8.000 BHP) and Redfish 4 (8.000 BHP) and operate in Indonesia water.
Marco Polo better be quick! :)
Hi Gark,
I am also just an everyday retail investor. Definitely not an expert. ;p
Anyway, I am very grateful that you decided to share your knowledge with us here. Much appreciated. :)
We can’t and won’t comment on third party reports. Thanks for your understanding.
In response to your queries:
1) We have embarked on building programme at our own yard as mentioned in public documents. We are expecting to deliver vessels every 3 months starting from May 2014, so we can expect to deliver at least 2 in 2014.
2) Yes, Indonesia is, and has been strictly implementing what was planned. http://www.indii.co.id/news_daily_detail.php?id=6056
Roadmap of Cabotage Policy in the Offshore Sector
No.
Type of Activity/ Type of Ship
Effective Period of
Implementation
1.
Oil and Gas Survey
a. Seismic Survey
until end-December 2014
b. Geophysics Survey
until end-December 2014
c. Geotechnics Survey
until end-December 2014
2
Drilling
a. Jack up Rig
until end-December 2015
b. Semi Submersible Rig
until end-December 2015
c. Deep Water Drill Ship
until end-December 2015
d. Tender Assist Rig
until end-December 2015
e. Swamp Barge Rig
until end-December 2015
3
Offshore Construction
a. Derrick/crane/pipe/Subsea Umbilical Riser
Flexible (SURF) laying barge/vessel
until end-December 2013
b. Diving Support Vessel (DSV)
until end-December 2012
4
Offshore Operations Support
a. Anchor Handling Tug Supply Vessel, larger than
5,000 BHP with Dynamic Position(DP2/DP3)
until end-December 2012
b. Platform Supply Vessel
until end-December 2012
c. Diving Support Vessel (DSV)
until end-December 2012
5.
Dredging
a. Drag-head Suction Hopper Dredger
until end-December 2013
b. Trailing Suction Hopper Dredger
until end-December 2013
6.
Salvage and Underwater Works
a. Heavy Floating Crane
until end-December 2013
b. Heavy Crane Barge
until end-December 2013
c. Survey Salvage
until end-December 2013
Source: INSA
3) Each company also focuses on different niche or different types of vessels. Important point to note is that the current demand is increasing at a faster clip than supply. The increasing daily charter rates would bear out this phenomenon.
Hi AK
Was using phone to direct copy and paste to get team update immediately. Might be messy on the table .
Expansion should be good as 1vessel within the quarter
Hi Gregg,
Thanks for the speedy action and for sharing the response. :D
Sounds good. Seems that everything is happening as per our expectations.
What is left for us to do is to simply wait. :)
Hi AK
I think one vessel within the quarter should be good enough to catch the wave.
2 vessels for 2014 is fair enough. Means more than 6 months to wait for the next vessel.
based on my calculations each 8000 BHP AHTS will contribute USD 1.6 mil to BBRM's profit and thus USD 0.8 mil to MPM.
FY13 - estimate BBRM net profit will be 6.5 mil, MPM share will be 3.25 mil
In FY14, contribution from BBRM is estimated to be below :-
Tug and Barges - 3 mil
Existing AHTS - 6 mil
1 new AHTS delivered May 2014 - 0.8 mil
MPM's share of chartering profits for FY14 will be USD 4.9 mil
Hi Gregg,
A bit slow is OK as long as they are steady! Slow and steady wins the race! No? ;p
Hi Gark,
Thanks for the estimates! Much appreciated. Looks good! :D
Hi Gark
Possible to meet FY2013 profit for MPM? Or at least ~20mil ...hehe ..sounds greedy ..
Hi,
Asking if anyone attended the AGM this morning?mind to share here ?
Hi Gregg,
Unfortunately, I was unable to take leave from work today. :(
Hi Capricorn,
I like the results. :)
Ship Chartering Division more than tripled and Ship Building & Repair Division improved by 21.6% in revenue over the same period last financial year
Improved operational performance with gross profit increased by 56.5% to S$9.2 million and profit from operations up by 43.0% to S$6.1 million in Q1FY2014 vis-à-vis Q1FY2013.
See anything you don't like? ;p
Hi AK
My concern as below, waiting reply from them. (maybe you already have the answer, lol)
(comparing with Q4 2013)
1) Gross Profit is actually decreased from 9.7mil to 9.1mil. With the full quarter contribution from MP Prevail, and partial from MP Prelude/Premier, I am expecting the gross profit to be higher but result doesn’t show that way. (higher profit margin for Chartering)
2) In the cash flow statement, what is the “Due from customer for construction contracts”? When is the expected timeline to collect back the money?
3) Trade and other receivables slightly jump up, is it due to new charter contract that possibly client is not paying yet?
4) Investing Activities: great turnaround from -25mil (Q4 2013) to -1.5mil (Q1), the sharp reduction is it possible due to near completion of the new vessel?
5) Finance cost $2mil vs profit from operation $6mil, seem to be quite high
Outlook for next quarter:
1) Any business discussion on the chartering of MP Prevail since the 100Days charter going to end very soon.
2) Forecast on the capital expenditure.
Hi Gregg,
I like your questions! :)
Instead of running the risk of putting a foot in my mouth, I shall wait for you to share the reply from the IR officer at MPM. ;p
Actually, any interest in writing a guest blog on MPM? You have been in touch with them constantly and must have formed an opinion of the company. Maybe, a guest blog with a title "Tea with Gregg: An opinion piece on Marco Polo Marine."
Sounds good? :)
Hi Gregg and AK,
Looking forward if there is a "tea session".
Anyway, I attended the AGM cum EGM yesterday. Countable investors were there, and there were only two questions posed to the board which are: Qn1 - How does MPM intend to do when the US tapering comes? Answer: They said that they will hedge against fixed i/r. Qn2 - What was the purpose of asking shareholder on the IPT Mandate process. Answer: They are just trying to simplify transactions between interested parties. Sounds more like improving business operation.
What I liked after attending the AGM, CEO seems quite confident and sure about his business plan and he believes in spotting the next wave which will put MPM into good position.
During the release of results, most number of votes abstained was the portion on the proposed IPT mandate process. It was like the highest! Lolx! I can understand why so many votes were abstained! Probably due to lack of visibility and governance on this process bah!
Hi Gary,
So, I guess you enjoyed the AGM/EGM?
You seem to have a good impression of the CEO.
Thanks so much for sharing! :)
Hi Gary,
Thanks for the AGM sharing.
Too bad that i am not able to take the timeoff to attend the AGM due to work.
Side talk topic, did you see Vivian Hsu there?
Gregg,
HI AK,
Thanks for tea session.
I am shy and not good in writing a long blog post. lol.... :)
Gregg
Hi Gregg,
Start with a short guest blog. No need to jump into the deep end of the pool. ;p
OK lah. Whenever you are ready. No pressure. :)
Hi,
MPM officer is quite busy today and ours phone call rearrange to next tuesday
Do you have other questions for MPM ?
Gregg
Hi Gregg,
I can only think of a couple of cheeky questions. So, never mind. ;p
Thanks for the update. :)
Greg, one of the things on my mind is, the depreciation costs seems to be pretty large (5366 compared to net profit of 5192)- is this perhaps over-conservative accounting? Since I assume the vessels and the yard are constantly maintained, and a vessel life should be pretty long (20-30 years?) and have a pretty steady charter rate which doesn't really decline with time, and after that still have a scrap value at the end of the life?
I made a simple calculation, and annualizing the depreciation, then dividing it by the total PPE, gives 7.5% depreciation per annum. Just a thought. AK- what do you think, stupid question?
Hi ryan,
Not a stupid question at all. :)
Well, my take is that depreciation is a non-cash item anyway and doesn't impact the performance of the company.
What you have described could end up hiding more value if indeed your calculations are correct. :)
Hi Gregg
On the side talk topic, she wasn't there. It will be a great surprise to see her there! Lolx!
Hi Gary,
If she was there, then, I would kick myself for not sneaking out of the office to attend the AGM. LOL! ;p
Hi Ryan,
2013 AR page 51 indicated 15-20 years (useful lives) for vessel.
HI Ryan/AK:
I relook Q4 2013, there was one Impairment loss on trade receivables
recognized which cost $1mil, so, in fact Q4 profit should be above $6mil if we excluding this item (Q4 was reported profit $5.3mil).
Then, we compare Q1 2014 ($3.5mil vs Q4 2013 ($6mil), can I conclude that Q1 2014 actually worse off than Q4? If this is the case, operating income data will look very weird, where is the contribution from MY Prevail (100Day Charter) and MP Prelude/Premier (25% increase in the contract value)...... Or am I looking wrongly or miss out certain things?
Gregg
Hi Gregg,
I am not better informed or more qualified than you are. I don't have the answers you are looking for. I guess these will be questions for MPM to answer when you talk to them. ;)
Points taken after the chit-chat.
Q1 2014 is actually quite challenge for MPM as business in December was quite slow compare to previous year. Furthermore, MP Prevail only kick in mid of October. He told me that expected Q2 to be better.
MP Prevail charter contract will be extending to another 1month once ending the 100Day contract
Due from customer for construction contracts – This amount of money will be collected back in May 2014. The money come from one vessel which plan to be delivered in May 2014 as well. But take note, this vessel is sold to 3rd party and not for own fleet. (Initially we thought is for MPM fleet expansion)
Next delivery of vessel will be in Aug/Sept period which going to add into MPM fleet.
Depreciation is taking straight line calculation which meant zero value by end of useful life for accounting purpose.
Total six vessels are under construction (in progress), expected 1 vessel/ quarter. Whether to be sold to 3rd party or for own fleet expansion is depending on the business strategy.
Shipyard repairing and building job are doing strong at the moment.
Hi Gregg,
Thanks for sharing. :)
Business seems to be doing well but the management is very conservative.
They could do much more if they were to leverage up but I guess they are uncomfortable with that idea.
Well, if they just keep chugging along and produce consistently good results with moderate growth thrown in, I will be quite happy. :)
Hi AK
I also did ask them why not try to source 2nd hand vessel like how they purchase MP Prevail, the reply was is very difficult to source and vessel overpriced. So,we have to monitor their shipyard progress ...
Hi Gregg,
Yes, I can imagine how it is. Now, everyone is trying to get into the OSV chartering business in Indonesia because of the cabotage law. OSVs have become super valuable assets.
Hi all,
Thanks for sharing.
Please continue to share.
Hope all will 888.
Hi AK,
MPM has set up MPM drilling pte ltd and has make order to PPL to construct a rig.
What are your view on this venture?
How will it affect the share price?
Hope you can share with us.
Thanks.
Hi SLC,
This is a very big leap forward for the company. It is totally beyond my expectations.
If I remember correctly, the Cabotage Law in Indonesia will extend to cover drilling rigs by December 2015.
http://www.oilpubs.com/oso/article.asp?v1=10981
So, to time the delivery of the rig by end 2015 is rather smart as foreign flagged rigs would be evicted from Indonesian waters by then.
A new built will also command a premium over much older rigs. It should have no problem being leased out when ready. The timing is perfect.
However, I am concerned about Marco Polo Marine's finances and whether they are over-extending themselves. This is a company with a market capitalisation of some S$135 million and it has just ordered a drilling rig that costs some US$214.3 million.
I need to ruminate on this but it is clear to me that the company will have to raise funds for this effort.
This is a long term investment and, if successful, Marco Polo Marine will become a much bigger player in the industry with a much bigger recurring income base.
Hi,
Thanks for your comment ,maybe this is the time for Gark who is very familiar with Indonesia market to surface out and hopefully he can give some additional input
LOL AK! Sorry I can't resist it so:
Beware what you wish for!!!
"Yes, I share your sentiments but I cannot help but wish that Marco Polo Marine's management could be a bit more aggressive. LOL.
JANUARY 13, 2014 AT 11:37 AM"
True story! (forgive me I'm still rolling on the floor laughing)
Seriously though, I'm quite pleased with this development. The management is continuing on a core that they are good at, and have performed exceptionally at, for many years- marine and chartering, specifically oil & gas related vessels. It's also leveraging on the same moat they've been "exploiting"- the Indonesian cabotage law, again moving in quickly to capture a new market.
This also explains the 300M note taken up late last year, it's enough to cover one jack up rig, and the first 50M taken, which covers the 20% down payment. The interest rate of 5.75% is very reasonable, compared to the margins we have seen for chartering in Indonesian waters.
Exciting times!
Hi ryan,
You troll... -.-"
OK, I know what I wished for but the wish has been granted in a way I did not expect. Jinns are so unreliable these days.
I was hoping that Marco Polo Marine would leverage up and buy assets which would immediately contribute to earnings much like the purchase of MP Prevail. This drilling rig purchase comes with a 2 years waiting period before we see any contribution...
Initially we thought we have to wait 1-2years to see the result , now it test our patience again ,2015-2016 for the new contribution....
Hi Gregg,
Indeed! Are we really long term investors? ;p
Sean Lee says it so well.
“The signing of the agreement with PPL Shipyard is an epochal moment as it marks the start of a significant leap forward in terms of our operations and service offerings.
“The group’s entry into this business segment coupled with the expected delivery of the rig in fourth quarter of 2015 is timely in view of the favourable demand-supply dynamics."
Hi Ryan/ak
Any idea which company has the similar business like leasing out jack up rig....
Hi Gregg,
Mermaid Maritime has a subsidiary, Mermaid Drilling.
KS Energy too has a subsidiary, KS Drilling.
In Malaysia, there is UMW Oil & Gas.
Looks like Mr market is happy on the mega deal ..
Hi Gregg,
Well, it is a bold step in the right direction.
I understand that the waiting time is what gets to people. However, the waiting time makes sense since the Cabotage Law for rigs in Indonesia only kicks in in December 2015.
If Marco Polo Marine is able to pay me while I wait, I don't really have a big issue with waiting. :)
We expect Marco Polo to secure a long term contract for the rig 6‐9 months before the slated delivery in fourth quarter 2015.
The new Jack-up, once delivered, can be Indonesian-flagged which enhances the likelihood of deployment when the cabotage compliance schedule for Jack-up rigs kick in at end FY15.
Charter rates will likely be higher than market average due to the dearth of high-spec Jack-ups capable of operating in excess of 300ft water depth in Indonesia. Atwood Manta, a Pacific Class 400 Jack-up currently operating in Thailand is able to command a day rate of US$159.5K. We believe that Marco Polo’s new rig can be chartered out at a day rate of US$170K if deployed in Indonesian waters.
We continue to stay positive on Marco Polo and believe that its underlying fundamentals remain in-tact. A strong catalyst for share price appreciation will come in the form of an attractive contract secured for its new rig. In the interim, the company will do well to ensure smooth deliveries of its 8,000BHP vessels to propel earnings growth through FY15.
- AM Fraser
Hi Ak,
Found this UMV O&G, has some jack up rig business in the SEA region (Maybank Report):
http://research.maybank-ib.com/pdf/document/UMW_Oil_&_Gas_Corp_4Q13_RR_20140225_5809.pdf
You can refer to slide 5, up to 400ft water depth, Indonesia only has 3 at the moment, not too sure other competitor movement, but i would think Marco Polo new venture business is right in time in coming 2015/2016.
Hi Gregg,
Looking back at how Marco Polo Marine has evolved, actually, we shouldn't be surprised by this latest development.
Sean Lee brought the company to where it is today from just being an owner of tugs and barges. He took bold steps to grow and strengthen the business.
Now, he is taking another bold step to bring it to a higher level. Management has the will and seems to have the ability to do this.
Can we trust the management to take care of shareholders? With the Lee family having a 60% stake and the company's record of paying out dividends, I believe so.
Hi AK,
Trying to spend my weekend reading BBR Full Year Report and spotted few interesting points.
Pls see slide 53:
http://infopub.sgx.com/FileOpen/BBR_IDX_Result_Announcement_FY2013.ashx?App=Announcement&FileID=275757
Name of Vessel: H-132
Delivery Date: 30-Sept-14
Contract Value: USD 21.5mil (did not see how long is the contract duration)
Slide 55:
Mp Prevail Contract value is USD6,168,500
Hi Gregg,
Thanks for sharing this very interesting detail on a new vessel to be delivered 6 months from now. :)
In a recent blog post, I wrote that revenue should improve in the next couple of years as a few more AHTS vessels are completed and chartered at higher rates. Good to have some solid numbers to back this up.
Much appreciated. ;)
What happen to Marco Polo, sleeping all the way?
Any latest info to share
Thanks.
Hi SLC,
Apart from two more AHTS vessels which are scheduled for completion this year, nothing much.
As shareholders, I think we already know what is in the pipeline, including the drilling rig to be delivered by end of 2015.
The new AHTS vessels to be completed in 2014 and 2015 will boost income but gearing will also increase significantly when the drilling rig is delivered.
Marco Polo Marine provides a rather exciting story that will unfold over the next 2 years. :)
Hi,
Anyone has any further updates on MP Prevail chartering contract.
I believed the previous chartered out contract should has expired by now.
When is the quarter result announcement and what can we expect, better profit?
Thanks.
Hi SLC,
With the latest development to buy a jack up rig which is only to be delivered end of 2015, I am not expecting any big positives in earnings until 2 years or so later.
Hi AK,
Would you care to share your views on the MPM Q2 result.
Is it in line with your expectation? And what is the likely hood of PT BBR fall into losses the next Quarter.
Thanks.
Hi SLC,
You might want to read my latest blog post on Marco Polo Marine which was published before the release of its Q2 results: http://singaporeanstocksinvestor.blogspot.sg/2014/05/marco-polo-marine-reason-for-price.html
What worries me now is this:
".. the Ship Chartering Operation of the Group reported a decrease in revenue in Q2FY2014 (relative to Q2FY2013) due primarily to lower utilization of the Group’s fleet of tugboats and barges amidst continued weakened shipping demand in Indonesia for the shipment of coal and other commodities."
From page 9 of:
http://infopub.sgx.com/FileOpen/MPM_Q2FY2014_Result_Announcement.ashx?App=Announcement&FileID=295560
If the weakness worsens, it is possible that BBR could make a loss in the next quarter.
Post a Comment