• Marco Polo Marine's stock is up 45% over the past 1 year, buoyed especially by its ship chartering business. That's why Group adjusted profit in FY23 surged 83% to $25 million.  Inset: CEO Sean Lee. Chart: Yahoo! Photo: Marco Polo• Marco Polo's support vessels have been transporting, and supporting the installation of, large wind turbine components during the construction of offshore wind farms in Taiwan. • The fleet, including vessels acquired through its PKR Offshore subsidiary last year, 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. • It's not just Taiwan where Marco Polo has gained a foothold. Marco Polo is seeking business also from Japan and South Korea owners of offshore wind farms. Read more about this from Maybank KE's initiation report .... |
Excerpts from Maybank KE report
Analyst: Jarick Seet
Marco Polo Marine (MPM SP) -- Sailing with the wind
| Initiate with BUY and TP of SGD0.088 |
We initiate coverage of MPM with BUY and a TP of SGD0.088, based on 11x FY24E P/E.
MPM, a long-time operator in the chartering and shipyard business is benefiting from the surge in demand and charter rates due to competition for vessels from the O&G and renewable energy sectors. 3) CSOV building completion. |
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Strong demand - charter rates rising 5-15% annually.
Due to limited investments since the oil price crash in 2016 and the lack of bank financing, the supply of vessels has been unable to keep up with the surge in demand, due to competition from the renewable energy sector.
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Key drivers |
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As a result, charter rates have been rising by 5-15% PA for the past 3-4 years, which has benefited MPM greatly, causing gross and net margins to improve from 14.3% and -29.9% in FY20 to 36% and 20.3% in FY23 and we expect margins to improve further.
All in all, we expect charter revenue to continue to rise by 25% YoY for FY24E and FY25E.
CSOV should be a key contributor in FY25E
We expect construction of the CSOV by MPM to be completed by 3Q24 and to start operations for wind farm client Vestas in Oct 2024/FY25E.
The CSOV will be deployed at offshore wind farms in Taiwan, Japan and South Korea over 3 years with a minimum utilisation commitment pa.
We expect utilisation to be around 80% for FY25E and FY26E, which should contribute about SGD4-5m net profit annually or about 20% YoY NPAT growth.
 Jarick SeetWe believe MPM has strengthened its strategic relationship with Vestas, especially in Taiwan, and Vestas will continue to be a core charter partner of MPM. Key catalyst ahead include:
Trading at just 6.9x FY24E P/E, MPM remains significantly undervalued vs global and regional peers at 15x and 25x on average. |
Full report here
