Marco Polo Marine: Indonesian Cabotage Law.

Someone told me I have been blogging a lot about Marco Polo Marine lately. Well, I guess it is natural since I think this is a company that is doing well and is likely to continue doing well.

My continuing research revealed that in Indonesia, foreign vessels that perform surveys, drilling, offshore construction, offshore activities, dredging work, salvage jobs and underwater activities for the oil and gas sector are exempted from the cabotage law.

The cabotage law? Indonesia enacted a cabotage law in 2005, but enforcement was delayed for years.
The Indonesian Cabotage Law requires all vessels operating in the country’s waters to register as Indonesian-flagged vessels by 7 May 2011.

Marco Polo Marine via its Indonesian subsidiary company, PT Pelayaran Nasional Bina Buana Raya ("BBR"), reflagged all its vessels earmarked for plying in Indonesian waters to comply with the law.

Apart from tugs and barges, Marco Polo Marine also owns anchor handling tug supply (AHTS) vessels. What are these? They are vessels built to handle anchors for oil rigs. So, with the exemption mentioned earlier, does it mean that Marco Polo Marine's fleet of AHTS is at a disadvantage?

Further research found that there is a requirement by the Indonesian Transportation Ministry for companies to prioritize local companies as service providers in oil and gas shipping.

Local and foreign companies are required to seek Indonesian-flagged shipping companies first in a tender. They can turn to foreign firms if they fail to get local companies within three rounds of bidding. Even then, they can only use foreign vessels through a local company!

I am of the opinion that a substantial part of Marco Polo Marine's economic moat is provided by the Indonesian Cabotage Law. This allows them to charge a premium on its charter rates which OSK Research has called the company's most promising source of high margin growth.

References from The Jakarta Globe:
1. Govt Exempts Oil, Gas Vessels From Cabotage Law.
2. IPO-Bound Shipper Buana Plans to Cash in on Cabotage.

Related post:
Marco Polo Marine: Looking into the future.

China Minzhong: 2Q FY2013 stellar results.

There is a slight slippage in gross profit margins and I do mean slight but the rest looks good:

For the 6 months ended 31 Dec 2012:

Revenue improved 45.7% y-o-y

Gross profit improved 19.9% y-o-y

Gross profit margin is at 33.9%

Net profit margin is at 22.9%


Within a 6 months period, the balance sheet of the company has also strengthened with cash and bank balances increasing by 642.6% from RMB 66.2 million to RMB 491.6 million.

NAV per share improved 9.5% to RMB 7.05.

The improvement in its cash position is directly related to an improvement in cash flow from operations which increased 336.2% for the 6 months ended 31 Dec 2012, year on year.

I am still concerned about the TR which although reduced by 5.5% is still a hefty RMB 913.9 million. Out of this, RMB 158 million are overdue.

Overall, however, the results should please shareholders.

Could another round of re-rating upwards be on the cards?

See presentation slides: here.

Related posts:
1. China Minzhong: Share price to go higher.
2. China Minzhong: Partial divestment at $1.01.
3. China Minzhong: Going higher to $1.22 to $1.46.