SINGAPORE - Rationalisation of the offshore service vessel industry, signs of recovery in the traditional oil and gas sector, and diversification to offshore renewables are providing a tailwind of recovery for listed Marco Polo Marine (MPM).
UOB Kay Hian has noted these trends and upgraded the marine support services company's stock to "buy", with a target price of 3.6 cents.
The shares, which have been trending upwards in recent days, closed at 2.8 cents yesterday.
"The rationalised oil and gas offshore support industry has shown resilience over the Covid-19 pandemic," UOB Kay Hian noted. "Channel checks suggest vessel utilisation has been improving, helped by minimal new builds and more vessels on lay-ups.
"We like MPM for its lean operations following completion of its corporate restructuring efforts. A successful transition to new revenue sources would be a key turning point."
The research house noted that the company's operating and financial metrics were leaner and more efficient after a restructuring in 2017 and it was now delivering profitability and lower expenses.
Meanwhile, its balance sheet had been largely cleaned up with cash injections and reduced debt. The company was net cash to the tune of $8.8 million for the half year to March 31 this year.
Recurring income for ship repairs was growing strong, with first-half 2021 revenue up 37 per cent, UOB Kay Hian noted.
At 3.6 cents a share, the research house values the company at 1.1 times price-to-book, based on financial results forecast for next year.
It said valuations are supported by the massive write-down on its assets undertaken during the corporate restructuring in 2017, during the height of the crisis.