Mermaid Maritime Public Company, a Thailand-based subsea and offshore services provider, is enjoying a clear post-pandemic recovery, as it successfully expanded into new markets in the Middle East, West Africa and the North Sea.
Currently, MMT operates eight subsea vessels, 18 saturation/air diving systems and 14 remotely operated vehicles.
"Profitability has grown materially over the past three years with management guiding for EBITDA margin expansion in 2024 and 2025. In 2H23 alone, the company doubled its order book to finish 2023 at US$734 million," writes UOB Kay Hian in an unrated note on April 12.
For its FY2023 ended December 2023, MMT increased its revenue by 23% y-o-y to US$275.4 million and managed to mount a turnaround from a loss of US$0.2 million to earnings of US$9.7 million.
The better numbers can be attributed to all-round improvements across the different business lines. Revenue between FY2019 and FY2023 grew at a CAGR of 27%.
The leading business segment is subsea inspection, repair & maintenance (IRM), which contributed 56% of FY2023 revenue; cable laying & engineering, and transportation & installation (T&I) and decommissioning, which accounted for 29% and 15% of the topline respectively.
Thanks to better utilisation of its vessels, MMT has enjoyed a 4.4ppt y-o-y increase in FY2023 ebitda margin to 13.8%.
"During our recent meeting with management, it appeared very confident that EBITDA margin can continue to expand in 2024 helped by higher charter rates, continued high vessel utilisation rates and supported by a robust order book," says UOB Kay Hian.
"In addition, the company noted that its low-margin contracts from 2021 and 2022 have been completed as at end-23, and all new contracts from 2024 onwards should experience higher day rates," adds UOB Kay Hian.
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In a sign of growing revenue momentum, in 2HFY2023, MMT doubled its order book from US$337 million to US$734 million due to, among others, a significant contract from Chevron Thailand for decommissioning work in the Gulf of Thailand.
UOB Kay Hian, citing the management, says this contract win will likely underpin its revenues for the next few years.
The company's balance sheet is well-poised to support growth. In February, MMT received a loan of US$55 million from controlling shareholder Thoresen Thai Agencies at below-market rates. This brings its net debt to equity is 0.6x.
Going forward, with oil prices seen to remain above US$80 per barrel, MMT's revenue and earnings growth will be well supported for the current FY2024 and coming FY2025.
As old contracts expire, the company should be able to charge higher rates for new contracts and sustain high utilisation levels with new order wins, says UOB Kay Hian.
Nonetheless, key risks to the stock appear to be low daily trading liquidity, a decline in the oil prices which could impact spending in the offshore oil and gas industry, and operational risks, the brokerage adds.
Mermaid Maritime shares were up 5.11% to change hands at 14 cents before lunch break today.
