UOB Kay Hian analysts Heidi Mo and John Cheong have maintained their ' buy' call and 6 cents target price on Marco Polo Marine 5LY -2.04% , as they expect the company to report better topline and earnings this year amid a buoyant energy market.

 

Specifically, the analysts have raised their revenue and earnings estimate for FY2023 ended Sept 30 by 7%, thanks to higher charter rates of its vessels as well as better utilisation of its yard space.

 

For the most recent 3QFY2023 business update ended June, revenue was up 28.9% y-o-y to $36.8 million, which has brought 9MFY2023 revenue to $92.7 million, up 65.1% y-o-y.

 

Mo and Cheong, in their Sept 25 report, point out that Marco Polo Marine is benefitting from increased investments in offshore windfarm projects, which means possibly higher charter rates for its fleet of offshore support vessels.

 

In addition, with the construction of Dry Dock 4, the company is expanding its yard capacity by 25% by 1QFY2025, which gives it the potential to win over more repair businesses. As of 3QFY2023, its yards are already at a utilisation rate of 93%.

 

The analysts also note that Marco Polo Marine has continued to effectively market its business operations to regional ship owners in Indonesia to undertake more shipbuilding projects, while widening its customer network for ship repair activities to drive revenue growth. 

 

See also: KGI reiterates ' buy' call on Banyan Tree, little impact from slow China market recovery

 

To grow its ship chartering revenue, the company is looking forward to putting its new commissioning service operation vessel to work by 3QFY2024.

 

Meanwhile, the company has also built up a strong net cash position of $50.2 million as at end-1QFY23, which provides a " comfortable level" of support, the analysts say.

 

Their target price of 6 cents is pegged to 1.3x FY24F book value.

 

Marco Polo Marine 5LY 0.00% is looking to build a new dry dock, which will increase its capacity for ship repairs by up to 25%.

 

According to the group, the move is aimed at capitalising on the increased demand for ship repairs while further strengthening the group&rsquo s financial performance.

 

The group plans to begin constructing the 240m-long dry dock, its fourth, in November. The construction is subject to the approval of the relevant authorities in Indonesia.

 

The project will be funded through a combination of operational cash flows and external financing from banks. The project is expected to be completed by the 1QFY2025.

 

&ldquo We have decided to build Dry Dock 4 to capitalise on the buoyant demand for ship repairs from our customers, as ship repair operations remain a consistent and reliable source of recurring income for us," says Marco Polo Marine CEO Sean Lee.

 

" Our aim is to provide efficient and exceptional services to our clients and simultaneously expand our customer base. This investment will not only help us achieve that, it will also enhance our bottom line over the longer term,&rdquo he adds