RHB’s small cap Asean research team is maintaining its ‘buy’ call and target price of 4 cents on integrated marine logistics company Marco Polo Marine.
This is expected to give the counter a 33% upside from its current 3 cent price, analyst Jarick Seet writes in a Nov 29 note.
His move follows the close to 49% y-o-y jump in the group’s revenue to $46.1 million for its FY2021 ended September. This came on the back of strong growth from its ship chartering (+48% y-o-y) and shipbuilding and repair segments (+51% y-o-y).
With this, the group’s after-tax profits rose to $3 million, a reversal from the $8.9 million in losses seen in FY2020.
“[This] is slightly ahead of our estimate,” writes Seet.
Looking ahead, he expects the oil & gas service business to continue raking in the dough for the group.
See also: Marco Polo Marine back in the black in FY2021 with earnings of $14.8 mil
Seet estimates that the group’s revenue and margins will benefit from a 5% to 10% rise in vessel charter rates in 2022.
This, he adds, will translate to a further 20% to 30% y-o-y growth in vessel chartering revenue this year and a corresponding expansion in Marco Polo Marine’s gross profit margin.
Meanwhile, Seet notes that the group may secure a contract under its shipbuilding business in 2HFY22, while its ship repair arm “should remain robust”. This, “may bring its shipyard’s utilization rate to close to 100%,” he estimates.
See also: RHB initiates coverage on CSE Global with ‘buy’ call with TP of 58 cents.
Another source of revenue for Marco Polo Marine would be: opportunities in renewable energy.
“We believe [this] is a potential major growth driver – especially with the influx of investments coming into this space,” observes Seet.
The group has already been pursuing opportunities in this segment, with 20% of its utilised vessels working on offshore windfarm projects in Taiwan, as of 1H2021.
Seet reckons that Marco Polo Marine will soon expand its operations Taiwan, “and will likely look to double its chartering fleet in this space by end-2Q2022, then have at least 50% of its fleet servicing the renewable energy sector by 2Q2023”.
A positive for the group is it is likely to benefit from the higher oil prices, for the World Trade Index (WTI) crude price has recovered to US$78/bbl ($106/81/bbl), following a gradual pick up in oil & gas activities.
This has brought on an uptick in Marco Polo Marine’s ship charter utilisation rates and ship yard operations, quips Seet.
As at 10.42am, shares in Marco Polo Marine were trading flat at 2.9 cents.
Cover image: Marco Polo Marine
