Wednesday, December 18, 2013
Marco Polo Marine
Marco Polo Marine (MPM): MPM has secured a 26-month contract for MP Prelude (with a 10-month extension option), a 13-month contract for MP Premier, and a 100-day contract for newly-acquired MP Prevail. The implied charter rates for these contracts at US$2.03-2.12/bhp/day are higher than previous rates of US$1.50/bhp/day, but within OSK DMG's expectations. House estimate these charters will yield >45% net margins and >64% asset ROEs, and provide good earnings visibility. MPM will be growing its AHTS fleet, capitalising on the strong returns available to Indonesian vessels in the cabotage-protected offshore space. Vessel prices have jumped 15% since the start of 2013, following a >35% charter rate jump over the last 18 months. MPM’s stock trades at 6.0x FY14F P/E and 0.76x P/BV, undervaluing its strong growth potential and high-margin businesses. House believe the weaker tug and barge fleet returns and lower yard utilisation have already been priced in. Maintain BUY with $0.55 TP based on 9x FY14F P/E.