Marco Polo Marine: H1 FY2013 EPS up 61.2%.

One of the numbers I always look at first in the reports of the companies I am invested in is earnings per share (EPS). As a shareholder, how the company performs on a per share basis matters a lot to me.

This evening, I got the positive results that I was expecting from Marco Polo Marine.

Results which were released at 5.38pm revealed a 61.2% increase in H1 FY2013 EPS compared to H1 FY2012. This is over and above my expectations.

With H1 FY2013 EPS at 4.06c, we could be looking at a full year EPS of close to 8c. This means that at today's closing price of 42.5c, Marco Polo Marine is trading at a modest PER of only 5.3x!

To trade at the 8x PER which I think is closer to fair value would mean a share price of 64c! This is much higher than my initial fair value estimate made many months ago which was 50.5c.

Realistically, I do not expect Marco Polo Marine's share price to trade at 8x PER soon. However, a re-pricing to 6x PER does not seem too far fetched. This would put share price at 48c or 12.9% higher than today's closing price.

Now, in my perfect world, tomorrow will see Marco Polo Marine's share price gapping up and hitting 48c. Of course, this is not my perfect world and we can only wait and see how Mr. Market will react to the rather bracing results tomorrow.

Read Media Release: here.

Related post:
Marco Polo Marine: Is this a good time to buy more?

 

Marco Polo Marine Ltd is an integrated marine logistic company which has expanded to become a reputable player in the marine industry in the region.
The Group’s ship chartering business provides Offshore Supply Vessel (OSVs) which are mainly Anchor Handling Tug Supply (AHTS) vessels currently being deployed in regional waters including the Gulf of Thailand, Malaysia and Indonesia, as well as tugs and barges to its customers, especially those engaged in the mining, commodities, construction, infrastructure and land reclamation industries.

The Group’s shipyard business undertakes ship building and maintenance as well as repair, outfitting and conversion services in Batam, Indonesia. Occupying a total land area of approximately 34 hectares with a seafront of approximately 650 meters, the modern shipyard also houses three dry docks which have led to the Group scaling up its technical capabilities and service offerings to undertake projects involving work of mid-sized and sophisticated vessels.

Sound Global: Fully divested once more.

I entered long positions at 50c and 52c because, respectively, I saw critical support levels holding up and because the reversal signal was confirmed. With the stock spotting weaker numbers, I got back in more with a trading mentality.

The question really was when to sell?

Technically, I was not convinced that the declining 20d MA was a strong resistance because I saw low volumes as price hit it and softened. A much stronger resistance, I thought, was at 57c. If you take a look at the chart, you will probably see why I thought so.

Fundamentally, Sound Global had a bad 4Q 2012. Earnings sank some 46%, quarter on quarter, and some 23%, year on year. All said, the company is still very profitable and it is still growing.

Its biggest problem stems from much higher finance costs and although I feel that the longer term big picture still looks good for the company, this will remain a bug bear for quite a while more.

Why do I remain largely optimistic about the company's prospects?

1. Sound Global has a huge order book of some RMB 3b, the largest in its history.

2. Sound Global has more than half of its BOT projects due for completion by end of 2013.

These will increase earnings, everything else remaining equal. Will earnings improve enough to make Sound Global a compelling investment once more? This is a harder question to answer.

Annualising 1Q FY2013's EPS which is, in RMB terms, 4.77c gives us 19.08c for the full year which is approximately 3.8c in S$ terms.

This means that at 57c a share, we are already looking at a PER of 15x for 2013. This would mean that we have hit fair value for the stock. Why?

The company's competition's PER is about there. The historical mean PER of the company is about there too.

If we choose to err on the side of caution, then, this valuation of Sound Global's stock and the looks of the technicals suggest that selling at 57c is not a bad idea. So, with price a bit higher than 57c this morning, I fully divested my stake in the company which makes this the second time in slightly more than two months.

See Sound Global's 1Q FY2013 results: here.

Related posts:
1. Sound Global: Full divestment.
2. Sound Global: Long position at 50c.