Marco Polo Marine
Price target:
Maybank Securities ‘buy’ 8.8 cents
Landmark financing secured
Long-time Marco Polo Marine (MPM) bull Jarick Seet of Maybank Securities has kept his “buy” call and 8.8 cents target price after the company secured financing that will help fund its bid to capture impending growth of the offshore wind market.
On April 17, MPM announced that its subsidiary PKR Offshore had on April 15 secured a project finance loan from Bank SinoPac Taiwan for its CSOV.
CSOV is the abbreviation for Commissioning Service Operations Vessel, a specialised ship that can be used to support the operations of offshore wind farms.
The vessel, MP WindArcher, is now under construction at Marco Polo’s Batam yard and will be delivered in September and deployed in Taiwan the following month.
The vessel has been chartered to support the wind farm operations of Vestas Taiwan.
“This is the first financing secured by MPM for a new vessel since its restructuring and demonstrates access to bank financing which frees up cash flow and enables faster expansion,” says Seet in his April 17 note.
According to Seet, the company has been growing thus far with its own cash, which crimps the pace at which it can grow its fleet and therefore its earnings.
“With this landmark financing, we believe MPM will be able to secure financing for the acquisition of new vessels for the offshore wind farm market, differentiating it from existing market players who have no or low access to bank financing,” the analyst reasons.
Citing his own channel checks, Seet estimates that the vessel is financed at up to 70%–80% at a rate of below 4%.
He expects MPM to secure longer-term contracts too for special operation vessels (SOV) and another CSOV.
Other pieces were already in place. Seet recalls that MPM had already signed a crew transfer vessel agreement to support Siemens Gamesa’s offshore wind projects in Taiwan and Korea.
MPM is seen to start providing two crew transfer vessels by the end of this year and the fleet size will eventually increase to 10–15 vessels within four to five years.
Seet estimates each vessel to cost around US$5 million ($6.82 million) and generate up to US$1.7 million in revenue, assuming a utilisation rate of 80%, leading to a gross profit of between US$1.1 million and US$1.3 million per vessel. “This could be significant if the fleet size grows,” he says.
Seet believes MPM has secured Vestas as a “core” charter partner and the company can look towards additional new long-term chartering contracts.
Other catalysts for this counter include strong 1HFY2024 ending June earnings to be reported next and further growth with the CSOV near completion.
With MPM trading at just 8.5 times FY2024 earnings, this counter remains undervalued vs global and regional peers which are fetching 15 times and 25 times on average, says Seet. —