The worst seems to be over for integrated marine logistics company Marco Polo Marine (MPM) given the more “rational environment” in the offshore support sector says UOB Kay Hian analyst Clement Ho in an initiation report.
The counter had been badly hit by the 2014 oil crisis and has been showing signs of improvement, particularly after a corporate restructuring exercise on Nov 17 2019.
This saw a cash injection of $60 million which has since seen a return to full-scale operations and a positive EBITDA.
“We like its lean operations and revitalised debt structure, providing promptness and flexibility to navigate the current tough environment,” writes Ho.
MPM had taken a hit from the 2014 oil crisis and has since been diversifying from the oil and gas industry into the offshore infrastructure and renewable energy sectors. This includes submarine cable installations and services to offshore windfarms in Taiwan.
This translated to a marked improvement in the company's sales quality in FY2019 ended Dec 31, notes Ho.
Looking ahead, the group has one remaining offshore support vessel under warm lay-up that is immediately available should it clinch a new charter contract.
Quoting data on charter rates, Ho notes that prices have rationalized since the 2014 oil crisis, thanks to minimal newbuilds and more vessels on lay ups.
Rates have also rationalized following rising vessel utilisation demand in Southeast Asia’s infrastructure and renewable energy sectors, adds Ho.
With things looking up for MPM, Ho says the “only drag to the group’s turnaround is its loss-making 34.8%-owned Indonesian ship chartering associate”.
Still, he is posting a “buy” call on the counter at a target price of 2 cents. The call price is pegged to a 31% discount to “a severely-impaired book value of 2.9 cents a share,” elaborates Ho.
Currently trading at 0.56x net asset value/share at 1.6 cents on Aug 27, Ho’s call price gives the counter a 25% upside.
As at 12.08pm, MPM was down 0.1 cents or 6.25% at 1.5 cents.
