Marco Polo Marine: Riding the Offshore Wave

Marco Polo Marine, an integrated marine logistics group, has demonstrated notable resilience and growth prospects amidst the dynamic maritime industry. With a share price currently at S\$0.055 and a target price set at S\$0.072, the company presents a promising 30.9% upside potential. Marco Polo Marine specializes in ship chartering of Offshore Support Vessels (OSVs) in regional waters and shipbuilding and maintenance at its shipyard in Batam, Indonesia.

Financial Performance and Projections

Marco Polo Marine’s fiscal year 2024 (FY24) results surpassed expectations, with core earnings reaching S\$26 million, marking a 4% year-on-year (yoy) increase and beating forecasts by 9%. This was attributed to better-than-expected margins amid the offshore upcycle. Although FY24 revenue slightly declined by 3% yoy due to reduced ship repair volumes, it was offset by heightened ship chartering revenue driven by elevated charter rates.

Strategic Developments and Future Outlook

The company is poised for further growth with the introduction of a fourth dry dock, which is expected to bolster earnings by 9-16% from FY25 to FY27. Despite the challenges posed by one dry dock being unavailable, shipyard utilization remained high, averaging 91% for FY24. With all dry docks becoming fully operational by September 2024, and the new dry dock anticipated to enhance capacity by up to 25%, Marco Polo Marine is set to capitalize on increased ship repair activities.

Dividend Policy and Financial Health

Marco Polo Marine proposed a consistent dividend of 0.1 Singapore cents per share, reflecting its stable financial management and commitment to shareholder returns. The company’s robust net cash position of S\$36 million as of September 30, 2024, underscores its strong liquidity and financial stability, providing a buffer against market volatilities.

Market Position and Valuation

With expectations of a 5-10% increase in OSV charter rates in FY25 and sustained demand for vessels, Marco Polo Marine is well-positioned to leverage its strategic assets. The company’s valuation is pegged at 9.5x FY25F PE, based on a +1SD above its historical three-year PE range, reflecting investor confidence in its growth trajectory.

Analyst Recommendations and Share Price Catalysts

UOB Kay Hian maintains a “BUY” recommendation for Marco Polo Marine, driven by anticipated higher ship charter rates, vessel utilization, and potential new contracts. The commencement of Dry Dock 4 by February 2025 and the completion of the CSOV by January 2025 are expected to further enhance revenue streams.

Key Financial Metrics and Forecasts

• Net turnover projected to grow from S\$123 million in 2024 to S\$168 million in 2027.
• EBITDA expected to fluctuate, with a peak of S\$43 million in 2025.
• Net profit adjusted forecast to rise from S\$26 million in 2024 to S\$36 million in 2027.
• EPS projected to increase from 0.7 S\$ cents in 2024 to 1.0 S\$ cents in 2027.
• Strong net cash position supports a healthy financial outlook.