CGS International
May 15, 2025
Marco Polo Marine: Riding the Offshore Wind Wave with Margin Expansion
Marco Polo Marine (MPM) is strategically positioning itself in the growing offshore wind sector, with recent financial results and future plans suggesting a positive trajectory. This analysis delves into MPM’s performance, growth drivers, and investment potential.
1HFY9/25 Performance: Core Net Profit in Line with Expectations
MPM reported a 1HFY9/25 core net profit of S\$9.6 million, a 14% year-over-year decrease, but aligned with expectations, representing 38% of the FY25F estimate. This is attributed to an anticipated stronger performance in 2HFY25F. Revenues for 1HFY25 declined by 14% year-over-year to S\$52.7 million, primarily due to the absence of third-party charter revenue in Taiwan (estimated at S\$7.5 million) and subdued shipbuilding activity. However, this was partially offset by improved charter rates in Southeast Asia and stronger fleet utilization, which increased to 68% in 1HFY25 from 60% in 1HFY24. The favorable revenue mix towards higher-margin chartering supported a gross margin expansion of 5% points year-over-year, reaching 41%, exceeding the FY25F forecast of 39.5%. [[1]]
Growth Drivers: Chartering and CSOV Contributions
The commissioning, service, and operations vessel (CSOV) commenced operations for Siemens Games (Unlisted) in April 2025, operating at day rates of approximately US\$65,000. This rate is about 40% higher than its three-year charter with Vestas (VWS DC), scheduled to begin in October 2025F. Additionally, two new crew transfer vessels (CTVs) will be added in 2HFY25F, with one already deployed in Taiwan. These additions are expected to compensate for lower revenues from third-party chartering in Taiwan, potentially driving a 15% year-over-year growth in chartering revenues for FY25F. MPM is actively pursuing a second CSOV, which could be operational by late-2027F if construction begins by the end of 2025F. [[1]]
MPM intends to gradually divest its lower-value tugs and barges serving other industries to reinvest in the expanding offshore wind business. Yard utilization decreased to 78% in 1HFY25 from 89% in 1HFY24. Despite ongoing newbuild inquiries, management anticipates that macroeconomic uncertainty may continue to impact customer sentiment in FY25F. [[2]]
Financial Table: 1H25 Financials
| FYE Sep (S\$ m) |
1H25 |
1H24 |
%yoy change |
FY25F |
FY24 |
%yoy change |
Prev. FY25F |
Comments |
| Ship chartering |
32.0 |
32.9 |
-2.8% |
82.6 |
71.9 |
14.9% |
78.9 |
Improved charter rates and fleet utilisation partially offset lower third-party charter revenue and subdued shipbuilding activity. |
| Shipyard |
20.7 |
28.7 |
-27.8% |
45.5 |
51.6 |
-11.7% |
57.1 |
| Total revenues |
52.7 |
61.6 |
-14.4% |
128.2 |
123.5 |
3.8% |
135.9 |
| Gross profit |
21.6 |
22.2 |
-2.7% |
53.2 |
48.5 |
9.7% |
53.7 |
| % Gross margin |
41.0% |
36.1% |
|
41.5% |
39.3% |
|
39.5% |
| Opex, net |
(11.0) |
(9.0) |
21.9% |
(22.9) |
(21.3) |
7.1% |
(22.9) |
|
| EBIT |
10.7 |
13.2 |
-19.4% |
30.3 |
27.2 |
11.6% |
30.8 |
|
| % EBIT margin |
20.2% |
21.5% |
|
23.7% |
22.0% |
|
22.6% |
|
| Finance costs |
(0.8) |
(0.1) |
nm |
(1.7) |
(1.6) |
2.6% |
(2.4) |
|
| Share of JV & assoc. |
0.1 |
0.1 |
0.0% |
0.2 |
0.2 |
0.0% |
0.2 |
|
| Pre-tax profit |
10.0 |
13.2 |
-24.5% |
28.8 |
25.7 |
12.1% |
28.5 |
|
| Tax |
(0.8) |
(1.2) |
-35.8% |
(2.3) |
(1.8) |
27.7% |
(1.7) |
|
| % Tax rate |
7.6% |
9.0% |
|
8.0% |
7.0% |
|
6.0% |
|
| Profit after tax |
9.2 |
12.0 |
-23.4% |
26.5 |
23.9 |
11.0% |
26.8 |
|
| Minority interests |
(1.4) |
1.0 |
nm |
1.5 |
2.2 |
-33.9% |
1.8 |
|
| Net profit |
10.6 |
11.0 |
-3.4% |
25.1 |
21.7 |
15.5% |
25.1 |
|
| Core net profit |
9.6 |
11.1 |
-13.7% |
25.1 |
24.6 |
1.9% |
25.1 |
1HFY9/25 core PATMI was in line at 38% of our FY25F as we expect a stronger 2H. |
| Core EPS (Scts) |
0.26 |
0.30 |
-13.7% |
0.67 |
0.66 |
1.9% |
0.67 |
|
Investment Recommendation: Reiterate Add with a Lower Target Price
The net profit estimate for FY25F is maintained, but FY26F/27F estimates are lowered by 4.3%/7.5% to account for a slower yard recovery, partially offset by increased FY25F-27F gross margins of 41.5-42% due to improved chartering activity. The target price is reduced to S\$0.06, reflecting a cut in the target multiple to approximately 7x 2026F P/E (from 9x), aligning with industry peers. The “Add” rating is reiterated, based on an anticipated net profit CAGR of 18% over FY24-27F. Key catalysts for re-rating include securing a contract for a second CSOV and higher-than-expected fleet utilization. Downside risks include lower-than-expected yard utilization and delays in offshore wind projects, which could affect vessel demand. [[2]]
Financial Table: Key Changes
- FY26F-27F net profit reduced by 4.3-7.5%. [[3]]
Key Financial Metrics
- Current Price: S\$0.044
- Target Price: S\$0.06
- Previous Target: S\$0.08
- Up/downside: 36.4%
Analyst Information
- Meghana KANDE
- T (65) 6210 8515
- E meghana.kande@cgsi.com
- LIM Siew Khee
- T (65) 6210 8664
- E siewkhee.lim@cgsi.com
Financial Summary
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| Revenue (S\$m) |
127.1 |
123.5 |
128.2 |
152.6 |
164.3 |
| Operating EBITDA (S\$m) |
43.30 |
42.70 |
44.18 |
53.44 |
59.42 |
| Net Profit (S\$m) |
22.58 |
21.70 |
25.07 |
32.01 |
35.77 |
| Core EPS (S\$) |
0.006 |
0.007 |
0.007 |
0.009 |
0.010 |
| Core EPS Growth |
60.9% |
4.5% |
1.9% |
27.7% |
11.8% |
| FD Core P/E (x) |
7.01 |
6.71 |
6.59 |
5.16 |
4.62 |
| DPS (S\$) |
0.001 |
0.001 |
0.001 |
0.001 |
0.001 |
| Dividend Yield |
2.27% |
2.27% |
2.50% |
2.50% |
2.73% |
|
Sep-23A |
Sep-24A |
Sep-25F |
Sep-26F |
Sep-27F |
| EV/EBITDA (x) |
2.71 |
3.41 |
3.37 |
2.55 |
2.32 |
| P/FCFE (x) |
37.72 |
13.34 |
NA |
9.41 |
18.45 |
| Net Gearing |
(33.1%) |
(17.8%) |
(14.9%) |
(18.8%) |
(16.9%) |
| P/BV (x) |
0.97 |
0.89 |
0.79 |
0.69 |
0.61 |
| ROE |
15.1% |
14.0% |
12.7% |
14.3% |
14.0% |
| % Change In Core EPS Estimates |
|
0.05% |
(4.28%) |
(7.50%) |
|
| EPS/Consensus EPS (x) |
|
1.11 |
1.22 |
1.36 |
|
Fleet and Yard Utilization Trends
- Fleet Utilization: Increasing trend observed from FY23 to FY25F. [[3]]
- Yard Utilization: Fluctuations in yard utilization with a projected recovery in later years. [[3]]
Revenue Segmentation
Analysis of MPM’s revenues by segment (Shipbuilding, Ship Repair, Sale of Goods, Ship Chartering) provides insights into the company’s diversified income streams and growth potential. [[3]]
Earnings Revision
Details on earnings revisions and factors influencing these changes are important for investors monitoring MPM’s financial outlook. [[4]]
Peer Comparison
A comparison against industry peers highlights MPM’s competitive positioning and valuation metrics. [[4]]
ESG Analysis: Balancing Sustainability and Operational Challenges
MPM is making strides in environmental sustainability and social responsibility, but faces challenges that need to be addressed.
ESG Highlights
- Environmental Initiatives: Adoption of hybrid energy systems in CSOVs could reduce fuel consumption and emissions by 15-20%. MoU with Amogy to install ammonia-to-power systems. Venturing into green ship recycling with ISO 30000:2009 certification for its shipyard in Indonesia. [[5]]
- Trends: Reduced Scope 1 and 2 emissions by 12% year-over-year and energy intensity by over 50% year-over-year in FY23 due to LED lighting and hybrid technologies. Electricity consumption increased by 15% year-over-year due to growing operations. [[5]]
- Rising Workplace Safety Incidents: A fourfold increase in workplace safety incidents from FY9/21 to FY9/23 indicates potential safety protocol deficiencies. Increased accidents could lead to regulatory penalties, operational delays, and strained relationships with unions. [[5]]
Key Ratios and Financial Health
Analysis of key ratios such as Revenue Growth, EBITDA Margin, Net Cash Per Share, BVPS, and Return on Equity (ROE) provides insights into MPM’s financial health and performance trends. [[7]]
Recommendation Framework
Stock Ratings Definition: [[12]]
- Add: The stock’s total return is expected to exceed 10% over the next 12 months.
- Hold: The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
- Reduce: The stock’s total return is expected to fall below 0% or more over the next 12 months.
