Marco Polo Marine

OCBC on 8 May 2012

Marco Polo Marine (MPM) reported a 40% YoY rise in revenue to S$31.0m but saw a 22% fall in net profit to S$4.2m in 2QFY12, such that 1HFY12 net profit accounted for 49% and 44% of ours and the street’s full year estimates, respectively. Revenue was boosted by the group’s shipyard operations, but a drop in other operating income, higher admin expenses and share of loss of associated companies led to a lower bottom-line. Going forward, MPM expects the shipyard operations to continue to drive the group’s overall revenue for 2HFY12, mainly from the ship repair side. Meanwhile, MPM will set up a JV with Marine Tankers Holdings Pte Ltd to own and manage bunkering vessels. Maintain HOLD with unchanged S$0.43 fair value estimate on the stock.

2QFY12 results within expectations
Marco Polo Marine (MPM) reported a 40% YoY rise in revenue to S$31.0m but saw a 22% fall in net profit to S$4.2m in 2QFY12, such that 1HFY12 figures accounted for 53% and 49% of our full year estimates, respectively. However, 1HFY12 net profit accounted for 44% of the street’s expectations (Bloomberg FY12 consensus: S$19.53m). Revenue was boosted by the group’s shipbuilding and repair operations, but a drop in other operating income, higher admin expenses and share of loss of associated companies led to a lower bottom-line.

Shipyard dominant revenue driver
Ship building and repair accounted for 80.8% of total revenue in 1HFY12 compared to 60.7 % in 1HFY11. Correspondingly, ship chartering accounted for a smaller share as PT Pelayaran Nasional Bina Buana Raya (BBR) has been assuming more of the ship chartering business due to the cabotage rule in Indonesia.

BBR’s profits still impacted by forex movements
MPM saw a S$0.8m share of loss from BBR in 2QFY12 and this was mainly due to unrealized foreign exchange losses of S$2.5m that resulted from the weakening of the Indonesian rupiah against the USD in the last quarter. The foreign exchange movements had negatively impacted BBR’s vessel loans which were mainly denominated in USD and SGD. Stripping away the forex loss, BBR would have posted a profit of S$2.5m (instead of a S$2.2m loss) and MPM’s share of BBR profit would have been S$1.2m.

Ship repair outlook still positive
Going forward, MPM expects the shipyard operations to continue to drive the group’s overall revenue for 2HFY12, mainly from the ship repair side – management mentioned that there has been more enquiries for ship repair, outfitting and conversion services. The group will also set up a JV (operational from Jul 2012) with Marine Tankers Holdings Pte Ltd to own and manage bunkering vessels. Maintain HOLD with unchanged S$0.43 fair value estimate on the stock.