Marco Polo Marine's revenue fell 38% to S$15.2m

Blame it on weak newbuild orders.

According to OCBC Investment Research, Marco Polo Marine reported a 38% YoY drop in revenue to S$15.2m but saw a 3% rise in net profit to S$4.5m in 1QFY13, such that the latter formed about 20% of its full year net profit estimate, within its expectations. 

Here's more:

The fall in revenue was mainly due to slower progress in newbuild orders, resulting in lower ship building revenue. This was offset by higher ship repair turnover, which grew 75.5% YoY to S$8.6m in 1QFY13. Ship chartering revenue fell by 5.2% YoY to $5.5m with the mandatory docking of an offshore vessel.

Overall gross profit margin, however, increased from 25% in 1QFY12 to 39% in 1QFY13 with a higher proportion of ship repair revenue (which generally commands higher margins compared to ship building). 

Demand for larger AHTS vessels in Indonesia to grow Indonesia currently has only five AHTS vessels that have at least 8,000 BHP – two belong to Wintermar Offshore (year built: 2011), two belong to Marco Polo Marine (year built: 2011), and the remaining one is more than 30 years old.

According to management, there are increasingly more tenders of oil plots in certain areas of Indonesia such as Sulawesi where the waters are rougher and where demand for 8,000 BHP AHTS vessels is likely to be higher. 

The group is still upbeat on the outlook for the ship repair business for the next 12 months. Utilisation rates of its drydocks remain healthy; we believe they may be higher than the industry average of 80+%. 

Growth is also expected from the offshore support vessel segment – MPM is currently constructing a unit for its fleet, with plans for a second one. Maintain BUY with S$0.56 fair value estimate, still based on 8x FY13F EPS.