RHB Bank Singapore analyst Alfie Yeo has kept his “buy” call and target price of 8 cents on Marco Polo Marine as he continues to like the company’s prospects.
In his Jan 13 report, the analyst highlighted several positive factors such as the deployment of Marco Polo Marine’s new commissioning service operation vessel (CSOV) in 2025 and the construction of offshore windfarms, which is also expected to drive the vessel’s strong utilisation and charter rate.
In addition, the analyst expects the company’s earnings to grow on the back of more capacity from a larger fleet size and higher shipyard capacity.
Marco Polo Marine is slated to add three new vessels from 2024 to 2026. The vessels include two crew transfer vessels (CTVs) for Siemens Gamesa’s offshore wind projects in Taiwan and South Korea.
The company’s CSOV is also scheduled to be deployed, be fully operational and contribute to revenue in the 1HFY2025 ending March 31.
“With CSOV vessels currently in short supply, both utilisation and rates are expected to be positive,” says Yeo.
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Marco Polo Marine’s fourth dry dock is also scheduled to be completed in the first half of 2025, adding more capacity for ship repairs, the analyst adds.
Even though the company’s FY2024 earnings came below Yeo’s estimates, the analyst has raised his FY2026 earnings expectations by 6%.
“Despite the decrease in shipyard revenue missing expectations [in FY2024], we expect shipyard revenue to normalise when its CSOV which occupied one dock is deployed into service,” Yeo writes. “We raise FY2026 earnings by 6% to account for higher shipyard capacity and fleet size as they contribute progressively to revenue this year.”
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During the FY2024, Marco Polo Marine reported revenue of $124 million, 2.8% lower y-o-y, mainly due to lower capacity from its shipbuilding and repair segment; one of its three drydocks was used for constructing its CSOV. The segment declined by 16% y-o-y to $52 million. Otherwise, ship chartering grew by 9% y-o-y to $72 million thanks to higher charter rates and an increase in re-chartering of third-party vessels. Marco Polo Marine’s FY2024 earnings, which rose by 4% y-o-y to $22 million, also stood below Yeo’s estimates.
To this end, Yeo notes that his forecasts and target price is premised on improved charter rates, stronger utilisation rates, and the successful deployment of MPM’s CSOV – all over the next two years.
“We believe any underperformance in these aspects represent downside risks to our earnings estimates and target price,” he says. There is no premium or discount to the company’s intrinsic value as the company’s environmental, social and governance (ESG) score is on par with the country median at 3.1 out of 4.
Yeo’s target price represents an upside of 48.1% from the company’s last-closed price of 5.4 cents on Jan 13. It also represents a yield of 2% for the FY2025 ending Sept 30.
As at 9.58am, Marco Polo Marine’s shares are trading 0.1 cent higher or 1.85% up at 5.5 cents.
