The construction scene in Singapore took a hard hit from the COVID-19 pandemic. Supply chains got all tangled up, projects were delayed, and the demand for new developments dropped like a brick (pun intended).That being said, the industry is showing signs of recovery and rejuvenation, thanks to the solid backing from the government’s projects and the resilience of the industry players.In this article, we will highlight the underlying trends that will shape the sector and Singapore’s construction industry outlook in the foreseeable future.
4 Leading Construction Trends
The construction sector was among Singapore’s worst-hit industries during the pandemic. The slow productivity in construction work was largely due to substantial labour shortages amid ongoing border restrictions and implementation of stringent safety measures.
Consequently, Singapore’s heavy reliance on low-cost foreign labour for its construction sector has spurred a heightened urgency for construction businesses to integrate digital solutions, fostering adaptability and enhancing efficiency and productivity.
On top of that, in accordance with the new policy – Singapore Green Plan 2030, the government has pinpointed sustainability as a primary focus within the built environment sector.
Accordingly, four prominent trends are poised to mold the industry in the medium and long term. These encompass:
1. A growing demand for green buildings, manifested through the adoption of eco-friendly building solutions, such as smart sensors for monitoring water and energy usage.
2. A mounting emphasis on efficient construction practices, with the government advocating for the adoption of the Design for Manufacturing and Assembly methodology. This involves designing construction for off-site manufacturing before final assembly on-site.
3. A shift towards more inclusive designs, ensuring that the built environment accommodates individuals with diverse needs. Addressing the design requirements for an aging population holds particular significance, given that over a third of Singapore’s population is projected to be over 65 years old by 2035.
4. Increased incorporation of smart technology through the utilization of Integrated Digital Delivery (IDD). This approach leverages digital technologies to seamlessly integrate work processes and connect stakeholders involved in the same project throughout the construction and building phases.
In a nutshell, the Singapore authorities maintains an ongoing emphasis on sustainable practices, with the implementation of regulations pertaining to the use of prefabrication elements, decarbonization, redevelopment, and environmental protection and management at construction sites.
Breakdown of Construction Projects Pipeline
According to a media release, the Building and Construction Authority (BCA) projected that contracts totaling between $27 billion and $32 billion are likely to be awarded in 2023 – similar to what was observed in the past two years.
The private-sector construction demand is anticipated to be between the range of $11 billion to $13 billion, mirroring the figures from 2022. This projection is tied to the scheduled development of new condominiums and high-specification industrial buildings.
On the other hand, an estimated 60 percent of the overall construction demand for year 2023 is anticipated to come from the public sector, amounting to a range between $16 billion and $19 billion. This is attributed to the upcoming projects such as Build-To-Order (BTO) flats, MRT lines, and water treatment plants.
In the medium term, the Building and Construction Authority (BCA) envisions the annual total construction demand to come in between $25 billion and $32 billion from 2024 to 2027.
During this period, the public sector expects to sustain its ~60% lead in demand, with upcoming projects such as the Cross Island Line and several hospital developments.
Simultaneously, private sector construction demand is anticipated to remain steady, with an annual expected range of approximately S$11 billion to S$14 billion from 2024 to 2027. This outlook is underpinned by robust investment commitments, supported by the resilient economic fundamentals of Singapore.
Building a Comeback
The construction industry in Singapore is poised for stability in the coming years, thanks to various factors such as the digitilisation measures to improve efficiency, Singapore Green Plan 2030 and many more infrastructure projects.
For construction firms that have faced financial challenges, particularly in the aftermath of the COVID-19 pandemic, this phase of stability marks a promising beginning for a potential revival. The sector’s ability to withstand adversity, coupled with a steady influx of projects, creates fertile ground for these companies to bounce back and, subsequently, transform into profitable entities.
Below we ‘drill’ into some of the construction-related stocks in Singapore…
A quick glance shows that most of them are trading below 1x their book values and have below $100 million market capitalization. On top of that, many of them are still sitting near their 52 weeks low despite the recovery of the construction sector – something that investors can take notice of.
Now, let’s shine the spotlight on three stocks in the list:
Firstly, Tiong Seng Holdings Limited is a construction company in Singapore that has recently announced its intention to sell its leasehold property located at 510 Thomson Road for S$10 million.
Given that the proposed disposal is considered a major transaction under the SGX regulations, an extraordinary general meeting (EGM) was convened on 15 December 2023 and the ordinary resolution passed with flying colours (99% approval).
The company has stated that the rationale for the proposed disposal is to unlock the value of the property and to improve its cash flow and financial position. The company also intends to use the net proceeds from the proposed disposal for its general working capital purposes and/or to fund its business expansion plans.
Next up is BRC Asia – a construction company in Singapore that provides steel reinforcement solutions for various projects, such as buildings, bridges, and tunnels.
The company has state-of-the-art facilities and capabilities, such as the use of digitalisation, automation, and prefabrication technologies. The company also has a strong commitment to sustainability, as it supports the Singapore Green Plan 2030 and adopts green and smart features and standards in its projects.
BRC Asia’s orderbook remains robust, standing at S$1.3 billion as of end 4Q FY2023. It remains a strong proxy for Singapore’s construction sector, given its lion’s market share domestically.
Lastly, we have Sin Heng Machinery, one of the leading heavy lifting service providers in Singapore. The company has a fleet of cranes and aerial lifts that it rents out and trades and it also sells and distributes spare parts for the equipment that it deals with.
The majority of its orderbook is derived from the Land Transport Authority (LTA) and Public Utilities Board (PUB) and these government contracts are longer term and provide good orderbook visibility.
It also possesses a strong financial position with only a meager 0.9% debt/equity ratio and has been on an active shares buyback spree from September to November 2023.
Conclusion
In conclusion, Singapore’s construction industry is currently positioned for stability and expansion after the lessons learnt from the COVID-19 pandemic. With a focus on sustainability, digitalization measures, and a robust pipeline of infrastructure projects, the sector presents promising prospects.
This positive outlook is particularly beneficial for construction companies aiming to recover from temporary financial setbacks including the ones we cover: Tiong Seng Holdings, BRC Asia, and Sin Heng Machinery. While the construction sector may be perceived as dull and uneventful, its underlying stability and consistent demand make it a worthwhile area for investors to explore further.
Operating in four countries – Singapore, Malaysia, Indonesia, and Thailand, OxPay Financial Limited offers a range of payment solutions such as mobile wallets, QR code payments and cross-border remittances.The company’s focus on servicing merchants in the retail, transportation, and F&B industries through a fully integrated online-to-offline (“O2O”) platform has recently manifested in a strategic collaboration with Green Link Digital Bank Pte. Ltd. (GLDB).
A Quick Recap on Digital Banks – GLDB
Digital banks in Singapore have revolutionized the financial sector, delivering customers a fresh and accessible banking experience. The emergence of these digital banks has reshaped the banking landscape, with the Monetary Authority of Singapore (MAS) granting licenses to four distinct digital banks in 2020:
On this note, Green Link Digital Bank (GLDB) is held by a consortium involving Greenland Financial, Linklogis Hong Kong, and Beijing Co-operative Equity Investment Fund Management.
These banks provide a diverse array of banking services, ranging from virtual banking to digital wealth management, catering specifically to the market’s needs.
While Digital Full Banks are allowed to take deposits from retail customers, Digital Wholesale Banks like ANEXT and GLDB can only target non-retail segments i.e. providing banking services that cater to the monetary needs of small and medium-sized enterprises (SMEs).
And this is where OxPay and GLDB can collaborate in a win-win partnership.
OxPay and GLDB’s Partnership
In a press release dated 21 December 2023, OxPay announced a Memorandum of Understanding (MOU) with GLDB, aimed at exploring opportunities in merchant acquisition, with both companies leveraging their strengths to achieve mutual business expansion goals.
Under the terms of the MOU, OxPay’s subsidiary, OxPay SG Pte. Ltd., will actively promote GLDB’s banking and financing facilities within its growing merchant network.
In return, GLDB will be sharing OxPay’s cutting-edge payment solutions to its existing customer base – potentially increasing the base of prospective merchants and business entities for OxPay.
This strategic move underscores OxPay’s dedication to creating synergies within the financial technology sector, bringing together payment solutions and digital banking services for the benefit of clients and merchants.
Mr Yick Li Tsin, Chief Operating Officer of OxPay SG, commented,
“By combining OxPay’s robust payment solutions with GLDB’s specialised banking services, we are setting a new standard for integrated financial services. Our collaboration is not just about business growth, but also aims to create synergies to drive significant value for our customers and the market.”
Mr Gary Wu, Chief Marketing Officer of GLDB, added,
“As a digital bank, our financial services are naturally readily accessible. However, we have also ensured that we make it simpler, safer, and more rewarding for SMEs to obtain financial services from our collaboration with OxPay.”
Benefits from Growing ASEAN Payments Industry
The collaboration between OxPay and GLDB comes at a pivotal time for the ASEAN payments industry.
According to a report by Google, Temasek, and Bain & Company, the Asean payments industry is expected to reach US$1.3 trillion by 2025. The report also forecasts that digital payments will account for 40% of total payments in Southeast Asia by 2025, up from 10% in 2020, driven by the rapid adoption of e-commerce, online travel, and ride-hailing services, as well as the increasing penetration of smartphones and internet access.
With that in mind, the ASEAN market presents immense potential for companies operating in the payments and banking sectors. The integration of OxPay’s payment solutions with GLDB’s digital banking services bodes well for OxPay to capitalize on the burgeoning opportunities within the region.
OxPay’s Insider Ownership Emits Confidence
Another positive sign for OxPay’s investors is the high level of insider ownership and buying activity.
Chairman Mr. Ching Chiat Kwong – who is also CEO of Oxley Holdings – owns 27.8% of the company’s shares, indicating a strong alignment of interests with shareholders.
In addition, according to the latest filings, Mr. Ching has been actively buying more shares in the open market over the past year. This shows that Mr. Ching is confident and optimistic about the company’s prospects and performance, as well as his commitment to creating long-term value for shareholders.
Conclusion
In conclusion, OxPay Financial Limited’s collaboration with Green Link Digital Bank marks a strategic confluence of payment solutions and digital banking services.
Investors may find this collaboration promising, considering the potential for increased revenue streams, expansion of market share, and a strengthened position in the competitive financial technology landscape.
The company achieved a net profit of US$3.5 million, marking a significant turnaround from the loss of US$0.15 million in the preceding year. Gross margins also expanded from 15.8% to 28.0% during the same period – leading to a 528.3% Y-o-Y jump in gross profits to US$7.7 million.
This impressive growth is underpinned by a substantial 255% increase in revenue from US$7.7 million in FY2022 to US$27.6 million in FY2023, attributed to more contracts secured in the offshore wind industry.
The icing on the cake is the proposal of a final dividend of S$0.01 per share, less than 2 months after its IPO on 30 October 2023.
A quick look at its balance sheet shows that its debt/equity ratio stands at a paltry 8.9% so paying a dividend is no issue at all.
Navigating the Winds of Change
The company attributes its robust performance to the escalating demand for renewable energy initiatives, particularly in the offshore wind sector, where Sheffield Green holds a competitive advantage.
According to IRENA, employment in the renewable energy sector is expected to surge from 12.7 million in 2021 to 38.2 million by 2030.
After experiencing relatively flat spending between 2015 and 2020, investments in renewable energy, encompassing both private capital and public expenditure, increased significantly from USD 348 billion in 2020 to USD 499 billion in 2022, marking a substantial 43% growth. The majority of these funds were allocated to the solar and wind industries, with their collective share of total renewable energy investments escalating from 82% in 2013 to an impressive 97% in 2022.
In addition, Precedence Research estimates that the offshore wind sector is projected to grow from USD 33.0 billion in 2022 to USD 179.4 billion by 2032.
Hence, the company’s primary focus on offshore wind projects is well-timed, as the sector’s expansion is anticipated to catalyse substantial job opportunities in the renewable energy industry in the long run.
Company’s Growth Momentum
In its press release, the Group shared several initiatives to capitalise on these thriving industry trends namely:
Offering comprehensive human resource solutions
Sourcing for diverse roles from C-suite to technical and offshore crew positions
Provision of ancillary services such as meticulous handling of visa and work permit applications
To further strengthen its regional presence, the Group is strategically expanding into other international markets by establishing local offices. Notably, the Poland office commenced operations in November 2023, and plans are underway for the establishment of a US regional office in Boston.
Building on the success of its training centres in Taiwan, the Group envisions opening more training centres in markets like Japan and Poland to meet the escalating global demand for renewable energy personnel.
Bryan Kee, CEO of Sheffield Green, conveyed confidence in the FY2023 results with these comments:
“Reflecting on this transformative year, I am immensely proud of our team’s achievements. Our success in FY2023 is a direct result of the team’s relentless commitment, adaptability, and innovative strategies in the renewable energy sector.
Despite the challenging economic environment, we have not only managed to achieve significant growth but also enhanced our operational efficiencies and strengthened our market position. This success is a testament to our dedicated team and the solid partnerships we have fostered. We are excited to continue this momentum and further our mission of powering sustainable energy solutions.”
Peer Valuations
Based on the peer valuations chart above, Sheffield Green is trading at a relatively cheaper valuation compared to its global listed peers. The company has a price-to-earnings ratio of 8.9x, which is significantly lower than the industry average of 19x.
Some of the more renowned staffing players such as Manpower Group, Kelly Services and Singapore’s own HRnet Group have much higher P/E ratios of 17.4x, 31.4x and 11.1x respectively.
On top of that, Sheffield Green’s competitive edge in the renewable energy sector may be a stronger growth driver for its earnings going forward. This means that the company may be an attractive investment opportunity in the renewable energy staffing industry.
Conclusion
The Group’s strategic penetration into flourishing offshore wind markets in Taiwan, Japan, and Poland, coupled with its emphasis on workforce development, underscores its strong investment potential amid the burgeoning opportunities in the renewable (offshore wind) energy sector.
Be sure to ‘catch the wind’ as the Group navigates and capitalises on the rising momentum of renewable energy staffing solutions!
James Yeo: “Can you provide a detailed overview of Beverly JCG Ltd’s (BJCG) evolution and strategic transformations since its inception, particularly focusing on the key acquisitions and expansions and explain how these moves align with the company’s vision of becoming a major player in the aesthetic and healthcare industry in the region?”Dato’ Ng: “BJCG has undergone several strategic shifts and significant acquisitions. It was established as Albedo Limited in 2005 as an industrial products trading company before it ventured into the healthcare sector by investing in China Medical (International) Group Limited (CMIG) in 2016. In January 2019, the company was renamed JCG Investment Holdings Ltd.”In Nov 2019, it acquired 51% of Beverly Wilshire (BW) group of companies, which operates a branded chain of aesthetics medicine, plastic surgeries, dental clinics, and regenerative stem cell medicine, including hair transplants in Malaysia in Kuala Lumpur, Klang Valley and Pelating Jaya, Bangsar, Ipoh and Johor Bahru.
The Ng family, headed by myself, was the controlling shareholder of BW group, with key doctors as my shareholders. BJCG recently acquired two aesthetic and beauty spa clinics, including Dr BK Kim, in 100 AM Mall Amara Hotel in Tanjong Pagar Singapore CBD. This will start our first foray into Singapore and will contribute Singapore revenue to BJCG.
This will also position BJCG as a regional player in aesthetic medicine and have Singapore as our business headquarters. We are also cautiously venturing into Indonesia, Vietnam, and China via mergers & acquisitions (M&As) to augment the company’s profit.
Recently, BJCG acquired the balance of 49% of BW Group, ensuring the shareholders’ goals and objectives are fully aligned. This acquisition is a significant milestone for the company and shall further strengthen the BW brand in Singapore and the region to make the BW brand a household word.
The decision to list the company’s shares in Singapore was strategic, leveraging Singapore as a centre of medical excellence and its reputation as an international financial centre. Through these transformations and strategic decisions, the company’s aim has always been clear – to become a major player in the aesthetic and healthcare industry in the region.”
James Yeo:
“How has BJCG’s financial performance evolved post-acquisition, and what strategies are being implemented to maintain profitability and expand growth opportunities, particularly in Malaysia and regionally?”
Dato’ Ng:
“BJCG recorded a revenue of about S$10.5 million in FY2022. Despite the global pandemic, BW made its maiden profit in 2021, particularly through our Malaysian operations.
We aim to solidify our regional presence and explore new profitable avenues, maintaining a strong performance while embracing growth opportunities.”
James Yeo:
“Could you explain the rationale and strategic significance behind the 50:1 share consolidation and how this move enhances the company’s market appeal, share liquidity, and overall financial strategy in preparation for future growth initiatives?”
Dato’ Ng:
“The share consolidation, at 50:1 (consolidating every 50 ordinary shares into one ordinary share), will reduce the issued shares from 29.1 billion to about 582.2 million. This is a strategic move to enhance our market appeal and improve the share liquidity and volatility.
It’s a step to recalibrate our share structure, making our stock more attractive and meaningful to investors. This consolidation is part of a broader strategy to fortify our financial foundation and prepare for future growth initiatives.”
James Yeo:
“Can you elaborate on the structure and objectives of the Rights Cum Warrants Issue at a 3:1 ratio, particularly in the context of the recent share consolidation, and explain how this initiative aims to attract investment and support BJCG’s growth strategies?”
Dato’ Ng:
“In our recent Rights Cum Warrants Issue, structured at a 3:1 ratio following the share consolidation, we’ve set an advantageous issue price of S$0.035 per Rights Share, a significant reduction from the initially announced S$0.05. This new issue price is strategically placed at a 30% discount to the post-consolidation last traded price of S$0.05 per Share and about 24% below the theoretical ex-rights price of S$0.046 per Share.
We’re offering free detachable Rights Warrants with an exercise price of S$0.051 for each Warrant Share, compared to the previously announced S$0.06. This exercise price represents a modest 2% premium over the post-consolidation last traded price and is approximately 10% higher than the theoretical ex-rights price.
These adjusted prices for both the Rights Shares and the Warrants are designed to enhance the appeal of our offering to investors, aligning with our strategic goal of bolstering BJCG’s growth and expansion, particularly in the wake of our recent share consolidation. We believe this initiative is pivotal in attracting investment and fortifying our market position.”
James Yeo:
“Could you describe BJCG’s philosophy and approach towards service and safety in the healthcare sector, and how does this ethos contribute to the company’s distinction in the competitive aesthetic market?”
Dato’ Ng:
“We are a branded, fully integrated healthcare outfit. And our philosophy is that we always provide the Best 5-star services and practice safety first.”
James Yeo:
“Could you discuss how investors may underappreciate the share consolidation and Rights Cum Warrants Issue in terms of their potential to enhance the company’s market dynamics and attract strategic long-term investment, especially considering your growth projections from 2024 onwards?”
Dato’ Ng:
“Some investors may not fully recognise BJCG’s growth potential. Our share consolidation and subsequent Rights Cum Warrants Issue are geared towards creating a more dynamic market for our shares and attracting long-term, strategic investors.
By setting an attractive post-consolidation Rights share base price, good M&As, and a well-defined strategic alliances plan, BJCG will do better from 2024 onwards.”
James Yeo:
“As BJCG navigates its strategic initiatives and market developments, what message would you like to convey to our readers about the company’s direction, its approach to creating stakeholder value, and the opportunities it presents for investors in its ongoing transformation and growth?”
Dato’ Ng:
“While share consolidation often leads to initial market reactions, we are confident about our strategic direction. We have several key initiatives underway that should positively influence our stakeholders’ value.
Our approach goes beyond mere market trends; we are actively shaping our future with a clear strategic vision, a dedicated team, and a commitment to growth. BJCG represents a solid investment choice and a journey of transformation and success.”
Established in 1991, Marco Polo Marine is an integrated marine logistics company that provides a wide range of services to the offshore oil and gas, and renewable energy sectors.
The company has reported a strong performance for its financial year ended 30 September 2023 (FY2023). In this article, we will zoom into its financial results, growth prospects, valuation and more.
Powered By Twin Growth Engines
Marco Polo Marine operates 2 main business segments:
1) Ship Chartering Division relating to the chartering of Offshore Supply Vessels (OSVs), tugboats and charters, and
2) Shipyard Division relating to shipbuilding and provision of ship maintenance, repair, outfitting, and conversion services.
For FY2023, Ship Chartering revenue experienced a significant 47.4% year-on-year jump to S$65.9 million from S$44.7 million in the previous year.
The principal factor contributing to this boost was the complete consolidation of PT Bina Buana Raya (“PT BBR”) and PKR Offshore’s (“PKRO”) results in the ongoing financial year, as opposed to the partial consolidation in FY2022. It’s noteworthy that PT BBR and PKRO officially became subsidiaries of the Group in March and May 2022, respectively.
To add on, the revenue from Shipyard segment also exhibited a stellar 47.8% year-on-year increase to S$61.2 million as compared to the previous year, driven by higher contract values associated with repair projects and the initiation of new ship-building projects.
Consequently, Marco Polo Marine reported a substantial 78.9% year-on-year growth in EBITDA to reach S$43.3 million, underpinned by the higher revenue and better gross profit margins.
Excluding FX gains/losses and one-off items, the group’s adjusted net profit to owners saw a spectacular 82.6% jump from S$13.8 million in FY2022 to S$25.2 million in FY2023.
With that in mind, Marco Polo Marine is a leading integrated marine logistics group The company operates in Singapore, Indonesia, Malaysia, and other parts of Southeast Asia, and has been listed on the Singapore Exchange since 2007.
Stellar Growth Prospects
For the Shipyard business, the growth continues to be propelled by elevated contract values for ship repair projects and the securing of contracts to build several barges with progressive deliveries up to 2HFY2024.
The shipyard’s average utilisation rate stands at 84% in the 2Q FY2023 and has remained relatively stable in the past year as well.
For the Ship Chartering business, revenue growth has surged due to higher vessel utilisation and increased charter rates.
As seen from the chart above, average charter rates have climbed steadily from 112.80 points in 1Q FY2022 to 209.60 points in 2Q FY2023.
The trend for the ship chartering segment of Marco Polo Marine is positive, as the company expects to see sustained demand for its vessels, especially in the Asia’s offshore wind farm sector, which is expected to grow rapidly in the coming years.
On this note, Marco Polo Marine has established a strong presence in the offshore windfarm division through its partnership with Oceanic Crown Offshore Marine Services Ltd. and by acquiring PKR Offshore Co. Ltd.
The Group has also been securing significant opportunities in the offshore wind farm sector and has achieved notable milestones, including:
Building its inaugural Commissioning Service Operation Vessel (CSOV), slated for completion in the first quarter of 2024.
Establishing a Memorandum of Understanding (MOU) with Vestas Taiwan for the CSOV’s charter.
Venturing into the Japanese market with a groundbreaking MOU signed with “K” Line Wind Service, Ltd (KWS).
Making its debut in the South Korean market through MOUs with Namsung Shipping Co., Ltd. (Namsung) and HA Energy Co., Ltd. (HA-E) on January 11, 2023.
According to marketsandmarkets.com, the global offshore wind farm market was valued at US$31.8 billion in 2021, and is projected to reach US$56.8 billion by 2026, registering a compound annual growth rate (CAGR) of 12.3% from 2021 to 2026. This bodes well for the company.
To top it off, things are also picking up in the oil and gas markets, and this is expected to boost the charter rates for their offshore support vessels in the coming financial year.
Notable Recent Purchases by Company Insiders
In the year 2023 itself, we have 2 notable recent purchases from 2 individuals. Mr. Yun Lee, CEO of the firm, has acquired 1 million shares from the open market on 12 May 2023.
On top of that, Mr. Teo Jun Xiang, Non-Executive Director and Managing Partner of family office Apricot Capital, has been on an acquisition spree, snapping up a total of 5.5 million shares in the past year.
What’s worth noting is that his purchase prices are all above 5 Singapore cents, which means shareholders are getting a bigger bang for their buck since the stock is trading at S$0.048 at the time of writing.
Furthermore, Apricot Capital and CEO Mr. Yun Lee own a sizable 16.17% and 4.58% stake in Marco Polo Marine respectively, which gives them the incentive to grow the business because they have the biggest vested interest of all.
Valuation backed by hard assets
As of 30 September 2023, the Group is also sitting on a cash balance of S$63.1 million. Deducting the total borrowings of S$2.3 million, it equates to a strong net cash position of S$60.8 million.
This provides the Group with the financial flexibility to continue expanding its footprint in the thriving offshore wind farm market. On top of that, the company wishes to celebrate this achievement by rewarding shareholders with a dividend of S$0.001 per share, equivalent to an estimated 2.1% dividend yield.
In addition, the Group’s valuation is also primarily backed by hard assets including cash, OSVs and its Batam shipyard. As of 30 September 2023, the Group has a net asset value of S$0.043 per share, translating into a Price/Book of 1.1x.
Conclusion
In conclusion, Marco Polo Marine has demonstrated a robust FY2023 performance with its top- and bottom-line increasing double digits on a year-to-year basis.
We can also see how the expansion into offshore windfarm markets in Asia and recent insider purchases underscore confidence in the company’s prospects.
As the company continues to navigate the dynamic marine logistics landscape, investors can look forward to potential value creation and sustained growth.
Established in 1991, Marco Polo Marine is an integrated marine logistics company that provides a wide range of services to the offshore oil and gas, and renewable energy sectors.
The company has reported a strong performance for its financial year ended 30 September 2023 (FY2023). In this article, we will zoom into its financial results, growth prospects, valuation and more.
Powered By Twin Growth Engines
Marco Polo Marine operates 2 main business segments:
1) Ship Chartering Division relating to the chartering of Offshore Supply Vessels (OSVs), tugboats and charters, and
2) Shipyard Division relating to shipbuilding and provision of ship maintenance, repair, outfitting, and conversion services.
For FY2023, Ship Chartering revenue experienced a significant 47.4% year-on-year jump to S$65.9 million from S$44.7 million in the previous year.
The principal factor contributing to this boost was the complete consolidation of PT Bina Buana Raya (“PT BBR”) and PKR Offshore’s (“PKRO”) results in the ongoing financial year, as opposed to the partial consolidation in FY2022. It’s noteworthy that PT BBR and PKRO officially became subsidiaries of the Group in March and May 2022, respectively.
To add on, the revenue from Shipyard segment also exhibited a stellar 47.8% year-on-year increase to S$61.2 million as compared to the previous year, driven by higher contract values associated with repair projects and the initiation of new ship-building projects.
Consequently, Marco Polo Marine reported a substantial 78.9% year-on-year growth in EBITDA to reach S$43.3 million, underpinned by the higher revenue and better gross profit margins.
Excluding FX gains/losses and one-off items, the group’s adjusted net profit to owners saw a spectacular 82.6% jump from S$13.8 million in FY2022 to S$25.2 million in FY2023.
With that in mind, Marco Polo Marine is a leading integrated marine logistics group The company operates in Singapore, Indonesia, Malaysia, and other parts of Southeast Asia, and has been listed on the Singapore Exchange since 2007.
Stellar Growth Prospects
For the Shipyard business, the growth continues to be propelled by elevated contract values for ship repair projects and the securing of contracts to build several barges with progressive deliveries up to 2HFY2024.
The shipyard’s average utilisation rate stands at 84% in the 2Q FY2023 and has remained relatively stable in the past year as well.
For the Ship Chartering business, revenue growth has surged due to higher vessel utilisation and increased charter rates.
As seen from the chart above, average charter rates have climbed steadily from 112.80 points in 1Q FY2022 to 209.60 points in 2Q FY2023.
The trend for the ship chartering segment of Marco Polo Marine is positive, as the company expects to see sustained demand for its vessels, especially in the Asia’s offshore wind farm sector, which is expected to grow rapidly in the coming years.
On this note, Marco Polo Marine has established a strong presence in the offshore windfarm division through its partnership with Oceanic Crown Offshore Marine Services Ltd. and by acquiring PKR Offshore Co. Ltd.
The Group has also been securing significant opportunities in the offshore wind farm sector and has achieved notable milestones, including:
Building its inaugural Commissioning Service Operation Vessel (CSOV), slated for completion in the first quarter of 2024.
Establishing a Memorandum of Understanding (MOU) with Vestas Taiwan for the CSOV’s charter.
Venturing into the Japanese market with a groundbreaking MOU signed with “K” Line Wind Service, Ltd (KWS).
Making its debut in the South Korean market through MOUs with Namsung Shipping Co., Ltd. (Namsung) and HA Energy Co., Ltd. (HA-E) on January 11, 2023.
According to marketsandmarkets.com, the global offshore wind farm market was valued at US$31.8 billion in 2021, and is projected to reach US$56.8 billion by 2026, registering a compound annual growth rate (CAGR) of 12.3% from 2021 to 2026. This bodes well for the company.
To top it off, things are also picking up in the oil and gas markets, and this is expected to boost the charter rates for their offshore support vessels in the coming financial year.
Notable Recent Purchases by Company Insiders
In the year 2023 itself, we have 2 notable recent purchases from 2 individuals. Mr. Yun Lee, CEO of the firm, has acquired 1 million shares from the open market on 12 May 2023.
On top of that, Mr. Teo Jun Xiang, Non-Executive Director and Managing Partner of family office Apricot Capital, has been on an acquisition spree, snapping up a total of 5.5 million shares in the past year.
What’s worth noting is that his purchase prices are all above 5 Singapore cents, which means shareholders are getting a bigger bang for their buck since the stock is trading at S$0.048 at the time of writing.
Furthermore, Apricot Capital and CEO Mr. Yun Lee own a sizable 16.17% and 4.58% stake in Marco Polo Marine respectively, which gives them the incentive to grow the business because they have the biggest vested interest of all.
Valuation backed by hard assets
As of 30 September 2023, the Group is also sitting on a cash balance of S$63.1 million. Deducting the total borrowings of S$2.3 million, it equates to a strong net cash position of S$60.8 million.
This provides the Group with the financial flexibility to continue expanding its footprint in the thriving offshore wind farm market. On top of that, the company wishes to celebrate this achievement by rewarding shareholders with a dividend of S$0.001 per share, equivalent to an estimated 2.1% dividend yield.
In addition, the Group’s valuation is also primarily backed by hard assets including cash, OSVs and its Batam shipyard. As of 30 September 2023, the Group has a net asset value of S$0.043 per share, translating into a Price/Book of 1.1x.
Conclusion
In conclusion, Marco Polo Marine has demonstrated a robust FY2023 performance with its top- and bottom-line increasing double digits on a year-to-year basis.
We can also see how the expansion into offshore windfarm markets in Asia and recent insider purchases underscore confidence in the company’s prospects.
As the company continues to navigate the dynamic marine logistics landscape, investors can look forward to potential value creation and sustained growth.
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