Introduction
This report delves into the promising prospects of Singapore’s Offshore & Marine sector, focusing on the notable players, Pacific Radiance and Marco Polo Marine. The analysis covers comprehensive details on the companies’ strategies, financials, and growth opportunities, providing insightful recommendations for investors.
Pacific Radiance: Reshaping its Offshore Playbook
Overview
Pacific Radiance (PACRA) is a Singapore-listed offshore services provider with exposure to the global oil & gas and offshore wind industries. The company has strategically allocated its resources to reactivate fully-owned vessels and increase shipyard contributions, aiming to lift revenue by 34% in FY24F and 27% in FY25F.
Business Strategy
PACRA is focusing on expanding its capabilities in the offshore wind market in East Asia. Through its 49%-owned joint venture, Mainprize Asia, the company has been chartering crew transfer vessels (CTVs) to offshore wind farms in Taiwan and is constructing new CTVs to solidify its presence in this growing market.
Financial Restructuring
The company successfully completed a debt restructuring exercise in 2022, which involved the redemption of its notes via shares and perpetual securities. This move has significantly strengthened its balance sheet, reducing finance costs by 31-45% year-on-year and placing the company in a net cash position.
Investment Thesis
Pacific Radiance is well-positioned to benefit from a tight global vessel supply environment, with a growing focus on renewables easing ESG concerns. The company’s improving financial position and strategic expansion into the offshore wind sector present a compelling case for investment, with a target price of S\$0.07.
Marco Polo Marine: Time to Reap Benefits from Capex
Company Overview
Marco Polo Marine (MPM) is a regional offshore services provider headquartered in Singapore. The company charters a fleet of over 30 vessels to oil & gas and offshore wind projects across Southeast Asia, Taiwan, and South Korea. MPM has achieved significant revenue and EBIT levels in FY23-24, surpassing its previous peaks in FY13-14.
Strategic Investments
MPM’s recent capital expenditures have focused on expanding its shipyard capacity and constructing a new commissioning service operations vessel (CSOV) for offshore wind projects. These investments are expected to drive revenue growth starting FY25F, with full contributions anticipated in FY26F.
Financial Performance
MPM’s gross margin has expanded significantly due to elevated dayrates and utilization levels. The company is expected to continue strong cash generation, with potential for further fleet expansion and new CSOV construction. The company maintains a strong net cash position, providing flexibility for future growth initiatives.
Recommendation
With a target price of S\$0.08, Marco Polo Marine is viewed as undervalued, trading at a discount to its global peers. The company’s strategic investments and strong financial footing make it an attractive option for investors looking to capitalize on the growing offshore wind market.
Conclusion
Both Pacific Radiance and Marco Polo Marine are well-positioned to capitalize on the opportunities within the offshore & marine sector, driven by demand from both traditional oil & gas and the burgeoning offshore wind industry. With strategic investments and financial restructuring, these companies present promising prospects for investors.
