Marco Polo Marine - RHB Invest 2020-01-29: Coming Back Better & Stronger


Marco Polo Marine - Coming Back Better & Stronger

Survived the worst; turnaround imminent.

  • We met up with management of MARCO POLO MARINE (SGX:5LY) and discovered that this net cash company, which survived the oil price crash years ago, may be on the verge of a comeback to profitability. It returned to EBITDA positive in FY19, after a debt restructuring exercise in Feb 2018, resulting in a clean balance sheet.
  • A continued pick-up in the ship chartering and ship repair/building businesses should give it a good chance to see a profit this year.

Oil & gas activities picking up after a hiatus (since the oil price crash).

  • With oil prices on an uptrend since the crash in 2014, activities across the whole oil & gas chain have been steadily recovering, as seen across many of the company’s listed peers. Revenue from its ship chartering operations grew 44% y-o-y in FY19 due to higher utilisation of its fleet of offshore vessels. We understand that this trend is likely to continue despite an increase in the number of its fleet from five (FY19) to eight currently.
  • There are also two vessels left to be reinstated/upgraded, which should further boost profitability of its ship chartering business. Its shipbuilding and repair operations’ revenue recorded a slight decline of 10% mainly due to the absence of ship building jobs. However, with the uplift of oil & gas activities as witnessed by many of its peers, there is a good probability that the company can start to win shipbuilding tenders this year – it has already participated aggressively in some of these tenders.

Trading below massively impaired NAV and white knights’ and creditors’ entry price

  • The net asset value (NAV) per share was 3.1 SG cents as at 30 Sep 2019, which was massively discounted after its debt restructuring exercise, which was determined previously when rock bottom prices were reached during the trough of the crisis.
  • The white knights entered at an effective price of 3.2-3.3 SG cents (if performance shares were all awarded to the company’s chief executive Sean Lee) during its latest debt restructuring exercise.
  • At its current share price levels, it is still way below the levels of the white knights’ as well as the company’s NAV. See MarcoPolo Marine Share Price. Many of its listed local peers are also trading above their NAV after a rerating across the small caps oil & gas’ stocks following PACC Offshore Services (POSH, SGX:U6C)’s general offer.

Operating EBITDA positive in FY19, targeting PATMI positive in FY20F

Jarick Seet RHB Securities Research | 2020-01-29
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998 SAME 99998