Maybank Securities analyst Jarick Seet is seeing a “golden opportunity” to accumulate shares in Marco Polo Marine 5LY amid the counter’s recent share price weakness. Shares in the counter have fallen by some 20% since April this year and closed at 6 cents on July 4. Seet has kept his "buy" call and target price at 9 cents.
“Marco Polo Marine’s recent share price weakness does not appear to be related to its fundamentals,” says Seet. “In fact, the outlook for Marco Polo Marine has improved as chartering rates continue to rise.”
In his report dated July 5, Seet outlines several positives including Marco Polo Marine’s crew transfer vessel (CTV) agreement with Siemens Gamesa for the latter’s projects in Taiwan and South Korea.
The agreement, which was announced on March 21, was signed with the company’s Taiwanese subsidiary PKR Offshore.
Its first CTV was delivered to South Korea this week and is already in operations.
“We expect Marco Polo Marine to start supplying two CTVs by end-2024 and eventually grow to a sizable fleet of 10-15 CTVs within four to five years,” says Seet.
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“Each CTV is likely to cost about US$5 million ($6.8 million) and generate up to US$1.7 million per annum (p.a.) at an average 80% utilisation rate,” he adds.
As such, the analyst expects Marco Polo Marine to report a gross profit of around US$1.1 million to US$1.3 million per annum per vessel, which would be “significant” if the fleet size grows.
No delay in CSOV
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Marco Polo Marine’s commissioning service operations vessel (CSOV) is also likely to be operational in October this year. The CSOV is under construction at its shipyard in Batam and is scheduled to be delivered in September. The vessel will be deployed in Taiwan for a Vestas project in early October.
“Management said utilisation is likely to reach [over] 85% in the first two years and it has already been pre-booked by Vestas and other customers at average rates higher than we initially forecast,” says Seet.
“We believe Marco Polo Marine has strengthened its strategic relationship with Vestas, especially in Taiwan, and Vestas should remain a core charter partner,” he adds.
At its current share price, Marco Polo Marine is trading at just 7.7 times its FY2024 P/E, which Seet deems as “undervalued” compared to its global and regional peers, which are trading at 15 times and 25 times respectively on average.
As at 10.33am, shares in Marco Polo Marine are trading 0.1 cent lower or 1.56% down at 6.3 cents.
