Analyzing an Integrated Marine Logistics Company with 1 Year Shareholder Return above 100%

Article Highlights

• FY2021’s revenue grew by nearly 50% year-on-year.
• Apricot Capital is the largest shareholder for Marco Polo.
• Net cash position across the years.
• Positive free cash flow in FY2021.

Listed on the Mainboard of SGX since 2007, Marco Polo Marine Limited (“Marco Polo”) is a regional integrated marine logistics company which principally engages in shipping and shipyard operations.

The Group’s shipping business relates to the chartering of Offshore Supply Vessels (“OSVs”) for deployment in the regional waters, including the Gulf of Thailand, Malaysia, Indonesia and Taiwan, as well as the chartering of tugboats and barges to customers, especially those which are engaged in the mining, commodities, construction, infrastructure and land reclamation industries.

Evaluating Marco Polo Marine Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2021, Marco Polo’s revenue grew by 49.46% year-on-year to S$46.10 million. The higher revenue was helped by both Ship Chartering Operations & Ship Building & Repair Operations, which saw a higher average utilization rate for both tugboats and barges and OSVs, as well as increase in volume of ship repair jobs in the financial year.

Meanwhile, Marco Polo managed to be back in the black, with a profit after tax of S$14.77 million, as compared to a loss of S$9.21 million a year earlier. Apart from the higher revenue, the turnaround was attributed to one-off gains from the acquisition of debt and gain on disposal of property, plant and equipment.

Ownership

The largest shareholder for Marco Polo belongs to Apricot Capital Pte Ltd, which has a 17.21% stake in the company. Apricot Capital was founded by Mr. David Teo, who was the founder of Super Group.

Apricot Capital amassed the stake back in November 2017 when Marco Polo was facing financial difficulties and required fresh equity from white knights to turn the Group around.

The second largest shareholder belongs to Mr. Zhong Sheng Jian, who has a 10.41% stake in the company. Mr. Zhong is currently the Chairman & Chief Executive Officer for Yanlord Land (SGX: Z25) and is one of the white knights who injected fresh equity into Marco Polo.

Leverage Ratio

After the successful debt restructuring & fresh equity being injected into Marco Polo, the Group’s balance sheet has strengthened by leaps and bounds, as seen from its net cash position across the years.

On top of that, its total debt to equity ratio stands at just 0.039 times for FY2021 and it possesses a net cash position since FY2019.

Meanwhile, its interest coverage ratio saw a dramatic turnaround, from a negative figure in FY2019 and FY2020, to a positive figure of 108 times in FY2021. This indicates that the Group has sufficient profit on hand to meet its interest obligations, a far cry from the past where it is hinging on the risk of debt default.

Free Cash Flow

After experiencing a negative free cash flow in FY2019 and FY2020, Marco Polo’s free cash flow eventually turned positive in FY2021 to S$6.89 million.

The turnaround was achieved by the higher net cash generated from operating activities and the significant drop in the Group’s capital expenditure in the period.

Conclusion and Prospects

To conclude, Marco Polo’s financial performance saw a strong improvement in FY2021, with a higher revenue growth and a turnaround in its bottom line. Coupled with the net cash balance sheet and positive free cash flow, this shows that its business operations have become sustainable as it is able to generate free cash for the necessary capital expenditure.

In terms of prospects for its ship chartering business, the Group expects the utilization of its fleet of tugboats and barges to continue to improve as construction activities in Singapore starts to pick up pace.

For the Group’s shipyard division, Marco Polo will continue to focus on securing ship repair and maintenance orders from regional ship owners. Regarding its Shipyard’s dry dock 1 extension program as announced on 14 June 2021, it is approximately 54% completed as at the date of this announcement and the overall construction is expected to be fully completed as scheduled by January 2022.

Finally, Mr. Sean Lee, Chief Executive Officer of Marco Polo Marine, commented: “We are working on expanding into the renewable energy sector and extend beyond the Group’s target markets to diversify our source of revenue. While we have to be mindful of the overall recovery globally, we are optimistic about the momentum ahead.”

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