• Marco Polo Marine's stock is up 55% over the past 1 year, from 4.5 cents to 7 cents today. In fact, it is at its highest in at least the past 5 years. The gain: 300+%.

chart3.24Inset: CEO Sean Lee. Chart: Yahoo!


CTV at the wind turbinePhoto: Marco Polo• It is the stuff of a good comeback story. If you don't know, Marco Polo suffered through 5 years of bleeding and huge debts. White knights rode to its rescue. Then came a multi-year rise in profit on industry tailwinds.

• In particular, there is an emerging niche that Marco Polo's offshore support vessels have been serving -- transporting and supporting the installation of, large wind turbine components for the construction of offshore wind farms in Taiwan. 


• The fleet also provides support for the operations and maintenance (O&M) of wind farms. 

The vessels assist with crew transfer, technician accommodation, and transportation of equipment and supplies.

• This vessel chartering business is spearheading Marco Polo's rising profitability. It rides on an industry shortage of vessel supply (it takes 1-2 years to build vessels, depending on the complexity) while demand is rising.

• Now, bank financing has just landed on Marco Polo's doorstep. It is a significant day. Read why this is so in excerpts from Maybank KE's report ....

 

Excerpts from Maybank KE report
Analyst: Jarick Seet

Marco Polo Marine (MPM SP) -- Landmark financing secured

Maintain BUY with TP of SGD0.088
MPM said its subsidiary, PKR Offshore, secured financing from Bank Sinopac for its first commissioning service operation vessel (CSOV) MP WindArcher – due to be operational by Oct 2024. 

MARCO POLO 

Share price: 
6.9 c

Target: 
8.8 c

This is the first financing secured by MPM for a new vessel since its restructuring and demonstrates access to bank financing which frees up cash flow and enables faster expansion.

The same subsidiary earlier signed an Asia Pacific crew transfer vessel (CTV) pact with Siemens Gamesa to provide CTVs to support offshore wind projects in Taiwan and Korea from 2024-26 with an option to extend to 2030.

We believe MPM’s outlook is bright and maintain BUY our SGD0.088 TP at just 8.5x FY24E P/E.

Downside risks include a slowdown that leads to a drop in charter rates and demand for vessels
.


ratesup6.22

Financing signals faster expansion potential

MPM had been growing using its own cash with a net cash balance sheet which did not allow it to expand its fleet size at a faster pace.

Faster expansion


This is the first financing secured by MPM for a new vessel since its restructuring and demonstrates access to bank financing which frees up cash flow and enables faster expansion.

-- Maybank KE

With this landmark financing, we believe MPM will be able to secure financing for acquisition of new vessels for the offshore windfarm market, differentiating it from existing market players who have no/low access to bank financing.

Our channel checks lead us to expect financing of up to 70-80% of the vessel at an interest rate below 4% pa.

We expect MPM to secure longer-term contracts for other vessels types like special operation vessels (SOV) and another CSOV


CTV framework – huge potential

MPM’s subsidiary, PKR Offshore, in Taiwan signed an APAC CTV agreement to charter CTVs to support windfarm customer Siemens Gamesa’s offshore wind projects in Taiwan and Korea.

We expect MPM to start supplying 2 CTVS by end-2024 and eventually grow to a sizable fleet of 10-15 within 4-5 years.

Each CTVS will likely cost about USD5m and generate up to USD1.7m pa at an average 80% utilisation rate.

We expect gross profit of USD1.1-1.3m/pa/vessel which will be significant if the fleet size grows. 


Potential catalysts ahead

JarickSeet3.18Jarick SeetWe believe MPM has strengthened its strategic relationship with Vestas, especially in Taiwan, and Vestas should remain a core charter partner for MPM.

Key potential catalysts ahead include 

1) potential new vessels with long-term contracts with Vestas, and new clients.
2) Strong 1H24E earnings
3) CSOV building completion.


Trading at just 8.5x FY24E P/E, MPM remains undervalued vs global and regional peers at 15x and 25x on average.



Full report here 

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