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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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