RHB’s small cap Asean research team is maintaining its ‘buy’ call and target price of 4.1 cents on Marco Polo Marine.
This is expected to give the counter a 33% upside from its current 3 cent price, analyst Jarick Seet writes in an Aug 31 note.
His move comes as the group’s revenue for 9MFY21 ending in September has already exceeded that logged in FY2020 thanks to strong growth in its ship chartering and repair activities.
The group’s average utilisation and charter rates have also recovered to above pre-Covid-19 levels.
“We remain confident of a turnaround to profitability by the end of FY2021. We look forward to Marco Polo Marine securing more contracts in the renewable energy sector, which the company is pivoting towards,” says Seet.
The group has been actively seeking out opportunities in renewable energy. As at end 1H21, 20% of its utilised vessels were working on offshore windfarm projects in Taiwan.
See also: Marco Polo Marine on firmer footing; diversifies into offshore renewables
The way Seet sees it the Marco Polo Marine has an edge since the ages of its ships are less than 12 years and its vessels are more than well equipped given the more stringent requirements imposed for offshore oil and gas activities.
The group’s ships are also not made in China – a requirement that must be adhered to by vessels working on Taiwan windfarm projects.
By contrast, most of the offshore vessels in the region are above 12 years old and are built in China.
Seet believes the group will expand its operations in Taiwan and possibly look to double its chartering fleet there by end 2Q2022. Thereafter, he expects the utilisation rate of the group’s chartering fleet – which stands at around 60% - to rise to about 80% in 2H22.
This will bode well for Marco Polo Marine as the sector sees an influx of investments, notes Seet. He adds that the group’s plans will see a lift in its charter rates, and in turn its margins and profitability.
Meanwhile, the group’s shipyard division has been seeing strong growth following the resumption of oil & gas globally as well its foray into renewable energy.
As of 3QFY21, the company’s utilisation for its shipyard has surged to 94% and is expected to remain busy till the end of the year.
Seet points out that the oil & gas sector has been recovering since the oil price slump between 2014 and 2016.
The WTI crude prices has already reached around US$68/bbl, even as the sector took a hit from the pandemic.
Seet observes that oil & gas activities are gradually picking up as the world recovers from the pandemic.
“We believe the continued recovery will be positive for Marco Polo Marine across all its business segments,” he stresses.
For more stories about where the money flows, click here for our Capital section
As at 12.32pm, Marco Polo Marine was trading flat at 2.6 cents.
Cover image: Marco Polo Marine