macro polo marine presentation...*revenue dropped from 2011 due to acquisition of pt pelayaran...
TRANSCRIPT
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Macro Polo Marine Presentation February 2012
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Disclaimer
Please note that the information is provided for you by way of information only.
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see a registered trading representative or financial adviser for formal advise.
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Contents
Company Profile 1
Key Drivers 2
Valuation Model 3
Risk Analysis 4
Recommendation 5
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Macro Polo Marine Company Profile
Growing integrated marine logistic group principally
engaged in:
o Ship chartering business; i. Offshore Supply Vessels (OSVs) – Anchor Handling Tug
Supply Vessel (AHTS) for Oil and Gas industry
ii. Tugboats & barges for mining, commodities, construction
industries
o Shipyard business; building, repair and broking
services of tugboats and barges
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Offshore & Marine Value Chain
(Upstream)
Upstream
• Exploration
• Production
Midstream
• Processing
• Transportation
Downstream
• Refining
• Marketing
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Business Model
Value adds primarily to Upstream – Exploration
segment
Marco Polo Marine
Shipping
Tugs & Barges
Offshore Services
Shipyard
Shipbuilding Repair &
Maintenance Conversion
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Revenue
(S$’M)
2008 2009 2010 2011 2012
Shipbuilding
& Repair
25.8 27.6 31.8 52.2 69.3
Ship
Chartering
20.1 26.9 32.5 30.8 20.5*
Total 45.9 54.5 64.3 83.0 89.8
Revenue Breakdown
*Revenue dropped from 2011 due to acquisition of PT Pelayaran Nasional Bina
Buana Raya Tbk (“BBR”) to comply to Indonesian Cabotage law (to be explained later)
Source: Company Data, FY 2012
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Earnings Trend
• Revenue and profits have been increasing consistently
20
30
40
50
60
70
80
90
100
Reven
ue (
S$ M
illi
on
s)
Sales
0
5
10
15
20
25
Net Profit (S$ Millions)
Earnings
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Key Drivers
Indonesian Cabotage Laws - opportunity for domestic
players
Booming Offshore Marine Sector in Asia feeding growth
for support industries
Strong management
background and technical
capabilities to leverage on
opportunities
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Indonesian Cabotage Laws
Under the Cabotage Laws, only Indonesian Flagged
ships can legally operate within Indonesian waters
Effectively shuts out the international players,
leaving domestic players
with current assets in a strong
position to fill the gap
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Booming Offshore Marine Sector
Growing Energy Demand and Ballooning Fuel Subsidies
Fast growing energy demand and persistent high fuel prices
have caused Indonesia government US$21.67 Billion in 2012,
54% more than budgeted
Government forced to open up
for more investment to ramp up
domestic production to bring
budget deficit under control
Source: Reuters
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Booming Offshore Marine Sector
New exploration means deeper waters
More advanced and reliable support vessels are required for
deep sea operations,
• Allows ship chartering companies to command higher premiums
over the current 20% premium seen in Indonesian over regional
peers
BP Migas (ex Indonesia Oil and Gas regulator)
estimated 235 Offshore vessels by
2015, of which AHTS would constitute
58 of the total
Source: Deutsche, BP Migas
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Booming Offshore Marine Sector
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Strong Management & Capabilities
Strong team track record
Under CEO Sean Lee, the team successfully ventured into new
business and consistently achieve record profits for the company
Managed to attract Mr. Cheam Yeow Cheng, an industry veteran of
>20 years experience previously from Pan United
Third Dry Dock in operations and successfully installed
Dynamic Positioning System 3 (DP3)
The technical abilities of the shipyards allows the company to
leverage its expertise and capacity to undertake higher value-adding
new contracts.
Source: DMG
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Valuation Methodology
Ship building & repair
BU
Ship chartering
BU
Ship building
business
slow down
Just added
new dry dock
Build to charter
Indo chartering
business bullish
Ability to build =
ability to expand
economically
Financial model
• Relatively flat
revenue, estimated
slow growth of 2%
Key Assumption
• Expansion rate of 1.5
OSV vessel per year
• SG$ 712k annual rev
per vessel
Forward P/E
approach
DCF
approach
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Valuation Methodology
Forward P/E
1. Estimated forward P/E of 9x
2. Modeled 2013 EPS = $0.08
Fair Price = 0.70
Current P/E (x)
Marco Polo Marine Ltd 6.64
ASL Marine Holdings Ltd 8.34
ES Group Holdings Ltd 5.89
Sembcorp Marine Ltd 16.05
Nam Cheong Ltd 10.33
9.45
DCF
1. Assumptions
2. Cash flow
- 2013: $31.8m
- 2014: $32.1m
- 2015: $32.3m
- 2016: $32.5m
- 2017: $32.7m
- PV Terminal Value of $397.7m
Fair Price = 1.26
WACC 8% Debt % 28% Equity % 72%
Cost of Debt 3% Cost of Equity 10% Beta 1.07 Tax rate 15% Market rate 10% Risk free rate 1.5% Long term growth 2%
• Perpetual growth model (TV) is only suitable for
companies with stable cash flow
• TV accounts for large chunk of the total valuation and
is highly sensitive to assumption
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Sensitivity Analysis
Bear case Base case Bull case
1. Annual rev per charter vessel 676k (-5%) 712k 748k (+5%)
- fair value 0.67 0.70 0.73
2. Charter fleet expansion rate 1.0 (-33%) 1.5 2.0 (+33%)
- fair value 0.69 0.70 0.71
3. Overall net profit margin 29% (-10%) 32% 35% (+10%)
- fair value 0.63 0.70 0.77
Fair value range of S$0.63 to S$0.77
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Risk
Regulatory Risk
Examples such as the Cabotage laws as well as the
dissolution of BP Migas
Highly Cyclical Nature
Potential oversupply of support vessels
Collapse of energy prices will reduce oil and gas
exploration and production activities
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Risk
Small Cap
Small caps are tends to be more volatile and would
react quicker to market selloff
Liquidity
MPM’s current ratio at 0.79, lower than 1.1 and 1.06
for ASL Marine and Wintermar Offshore respectively
(excluding off-balance sheet guarantees)
Source: Bloomberg and Company Annual report 2012
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Conclusion
Macro Polo Marine…
Riding on increasing demand for energy in Indonesia
and Cabotage Law
Strong management team with good track record
and advance technological capabilities
Potential upside in valuation, with key downside risk
in execution of strategy