Marco Polo Marine

Marco Polo Marine: 1QFY14 net profit slumped 27.6% y/y to $3.3m despite revenue spike of 99% to $30.1m, after gross margin lowered 8.2ppts to 30.4% due to lower utilization of the group's tug boats and barges on weakened demand in Indonesia for shipment of coal and other commodities. In addition, the group recognized lower other income of $0.1m (-86%) from the absence of a one-off gain on fair value of convertible bonds, as well as increased finance cost of $2.0m (+538%) due to vessel loans by PT Pelayaran Nasional Bina Buana Rara Tbk (BBR) and the group's drawdown on its multicurrency medium term note program. The stellar top line came on the back its ship chartering business, which mushroomed 233% to $18.3m, attributed mainly to BBR (which status has been upgraded from associate to subsidiary, following its IPO), as well as strong demand for offshore supply vessels in the region. Ship chartering operations is expected to remain buoyant as gas exploration and production activities remain strong regionally. The acquisition of MP Prevail plus incoming deliveries of new vessels underscores management’s optimism that the chartering business would spearhead growth in the next 12 months. That said, Ship Building and Repair Operations is expected to be weigh on bottom line as competition is strong in the region. NAV at end Dec was 47¢, which translates to a P/B of 0.8x.