RHB Bank Singapore's Alfie Yeo has kept his "buy" call and raised his target price for Marco Polo Marine 5LY from 6 cents to 7 cents, with better earnings growth seen fo the coming FY2025.
For the year to Sept 2023, Marco Polo reported better-than-expected core earnings of $22 million, up 97% y-o-y, on the back of a 48% y-o-y increase in revenue to $127 million.
The growth was driven by the shipbuilding & repair segments, as well as higher average utilisation and charter rates for its vessels.
In FY2023, the company was able to eke out a better gross profit margin of 36%, from 31.9% in FY2022, as it was able to hold down costs while growing revenue.
Marco Polo plans to pay a final dividend of 0.1 cents per share, equivalent to a payout ratio of 17%.
Going forward, Yeo sees a buoyant outlook with growth from the chartering segment in support of offshore wind farms in Taiwan.
Separately, Marco Polo is targeting new customers for its ship repair and maintenance segment.
The company is now building a new support vessel, which will presumably help drive the chartering segment. The vessel is now 34% completed and is slated to commence service in 2HFY2024.
Yeo has lifted his FY2024-2025 earnings estimates by 14-17% on a higher FY2023 earnings base.
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"With a stronger-than-expected gross margin of 39% for 2HFY2023, we now ascribe better operating leverage on our forecasts, which also implies a stronger gross profit margin assumption.
Yeo expects earnings growth for the current FY2024 to be "flattish" due to costs incurred to build the new support vessel.
However, earnings for the coming FY2025 is seen to ramp up, giving rise to the new higher target price of 7 cents.
