Excerpts from SAC Capital report

Analyst: Lim Shu Rong 

Tides turning in favor of Marco Polo

Marco Polo

Share price: 
2.8 c

3.2 c

Marco Polo Marine Ltd primarily engages in ship chartering and shipyard businesses.

It has a fleet of 37 OSVs, tugboats and barges for charter.

The Group does ship repair and shipbuilding works at its 34 ha Batam shipyard. Revenue from Ship chartering/Shipyard segments are split 44%/56% each.

Promising potential in Taiwan windfarm market. MPM will be increasing the number of vessels chartered to Taiwan from 2 to 4 end 2022 as Taiwan ramps up its offshore wind capacity. Taiwan is aiming for 15GW by 2035. Local content requirements (i.e. Vessels’ age < 12 years old, Ban of China-built vessels) are raising the barriers to entry for competitors.

monopiles6.21Marco Polo vessels support offshore windfarm projects.Reflagging exercise will give the Group an edge to securing more contracts as well. Windfarm projects offer 15-20% price premium to O&G projects.

Enjoying higher charter and utilization rate. Brent crude oil is up 54.8% YTD hovering above US$70/barrel as at 28 Dec. Oil majors (i.e. TotalEnergies, ExxonMobil etc) have preliminary plans to increase CAPEX by 8-25% to capitalize on the current robust price environment. On the other hand, competing interests for OSVs from offshore renewables and decommissioning projects are snapping up available vessels in the market.

With ~50% of MPM’s vessels due for charter renewal in 1H22, further upside in charter rates will help with revenue growth and margin expansion.

Boosted capacity for growing ship repair works. Expansion of the Group’s dry dock 1 is 54% done and due for completion by Jan 22.

This will contribute an additional ~20% capacity which allows the Group to take on additional works. MPM continues to receive more installation works for ballast water management for the next 2 years as deadline approaches. Utilization rate of its 3 dry docks is ~86%.

We initiate at a target price of S$0.032, pegging it to 8.0x FY22E EV/EBITDA, median for the offshore sector and trading closely to that of its closest comparable, ASL Marine (8.0x).

The stock is currently trading at forward PE of 23.2x and 17.3x for FY22E and FY23E respectively.

Risks: Omicron variant curtailing oil demand

Full report here. 

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