Macro Polo Marine Presentation. February 2012

Transcription

1 Macro Polo Marine Presentation February 2012

2 Disclaimer Please note that the information is provided for you by way of information only. All the information, report and analysis were and should be taken as having been prepared for the purpose of general circulation and that none were made with regard to any specific investment objectives, financial situation and particular needs of any particular person who may receive the information, report or analysis (including yourself). Any recommendation or advice that maybe expressed in or inferred from such information, reports or analysis therefore does not take into account and may not be suitable for your investment objectives, financial situation and particular needs. You understand that you buy and/or sell and/or take any position in/or on the market, in any of the stocks, shares, products or instruments etc. based on your own decision(s). This is regardless of whether the information is analysed or not, regardless of the details or information related to price levels, support/resistance levels and any information based on technical or fundamental analysis. You understand and accept that nothing told or provided to you whether directly or indirectly is to be a basis for your decision(s) in relation to the market or your trades or transaction(s). Please see a registered trading representative or financial adviser for formal advise.

3 Contents 1 Company Profile 2 Key Drivers 3 Valuation Model 4 5 Risk Analysis Recommendation

4 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 ii. Supply Vessel (AHTS) for Oil and Gas industry Tugboats & barges for mining, commodities, construction industries o Shipyard business; building, repair and broking services of tugboats and barges

5 Offshore & Marine Value Chain (Upstream) Upstream Exploration Production Midstream Processing Transportation Downstream Refining Marketing

6 Business Model Value adds primarily to Upstream Exploration segment Marco Polo Marine Shipping Shipyard Tugs & Barges Offshore Services Shipbuilding Repair & Maintenance Conversion

7 Revenue Breakdown Revenue (S$ M) Shipbuilding & Repair Ship Chartering * Total *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

8 Revenue (S$ Millions) Earnings Trend Net Profit (S$ Millions) Sales Earnings Revenue and profits have been increasing consistently

9 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

10 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

11 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

12 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

13 Booming Offshore Marine Sector

14 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

15 Valuation Methodology Ship building business slow down Just added new dry dock Ability to build = ability to expand economically Indo chartering business bullish Ship building & repair BU Build to charter Ship chartering BU Relatively flat revenue, estimated slow growth of 2% Financial model Key Assumption Expansion rate of 1.5 OSV vessel per year SG$ 712k annual rev per vessel Forward P/E approach DCF approach

16 Valuation Methodology Forward P/E 1. Estimated forward P/E of 9x 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 Nam Cheong Ltd Modeled 2013 EPS = $0.08 Fair Price = Assumptions 2. Cash flow DCF : $31.8m : $32.1m : $32.3m : $32.5m : $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

17 Sensitivity Analysis Fair value range of S$0.63 to S$0.77 Bear case Base case Bull case 1. Annual rev per charter vessel 676k (-5%) 712k 748k (+5%) - fair value Charter fleet expansion rate 1.0 (-33%) (+33%) - fair value Overall net profit margin 29% (-10%) 32% 35% (+10%) - fair value

18 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

19 Small Cap Risk 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

20 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

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