Singapore is internationally recognized as one of the world’s top maritime ports, accorded as the world’s Top Maritime Centre for 8 consecutive years by the Xinhua-Baltic International Shipping Centre Development (ISDC) Index and the world’s Top Leading Maritime Capital Of The World for 4 consecutive years by Menon Economic’s Leading Maritime Capitals Of the World report. With such accolades, Singapore is home to many marine and shipping companies. While most Singaporeans are familiar with Sembcorp Marine and Keppel O&M, Singapore is also host to many smaller players in the marine industry that all play a part in our bustling port.
One of these marine companies is Marco Polo Marine (SGX: 5LY) which has been listed on the SGX Mainboard since 2007. Macro Polo Marine operates regionally, with a significant presence in Indonesia. The company focuses on integrated marine logistics and engages mainly in shipping and shipyard operations. Their shipping operations involve the chartering of Offshore Supply Vessels (OSV) for deployment in regional waters and the chartering of tug boats and barges. As of 1HFY2021, they have 11 OSVs and 2 Maintenance Work Vessels (MWVs) in operation. For shipyard operations, the company has a shipyard located in Batam, Indonesia that can undertake projects involving mid-sized and sophisticated vessels.
In June 2021, the company also announced its plans to extend their dry dock 1 which would increase its capacity for ship repairs by 20%. This is scheduled to complete by January 2022 and expected to contribute to the bottom line from 2QFY2022. The company also announced in May 2021 their plan to increased their stake in one of their Indonesia listed entity – PT BBR to 72%. This would increase Macro Polo’s presence in Indonesia.
Aside from expanding their ship repairs capacity where they seen growth in recurrent customers and their main focus on shipping and shipyard activities, Macro Polo is also diversifying to renewables by leveraging their existing capabilities to enter into the sustainables sectors. This includes securing contracts to construct 2 smart fish farms as well as deploying vessels to work on windfarm projects.
For those interested to find out more about the marine industry or interested to invest in marine companies, here are 5 things to know about Macro Polo’s business.
For someone who is new to your company, can you explain (in as little words as possible) what Marco Polo does?
Marco Polo Marine is one of the few fully integrated shipping players in the industry with both ship chartering and shipbuilding/repair & maintenance capabilities. Over the years, the Group has diversified its customer base beyond the traditional O&G sector to include renewables (in particular the offshore windfarm) sectors, as well as the repair and maintenance of merchant vessels such as containerships.
Having a “moat” or a competitive advantage is something many investors look for in companies they invest in. Can you share how Marco Polo has a strong business advantage?
Led by an experienced management team in Singapore, with one of the larger shipyards in Indonesia, Marco Polo Marine can provide good quality vessels at affordable prices for its clients, giving it an edge over its competitors.
The Group also has a young fleet of vessels, thanks to the Group’s company policy, and currently operates one of the youngest fleet of vessels in the industry. The advantages of operating a young fleet of vessels include lower operational cost and higher chance of vessels being chartered out. As a ship charterer, Marco Polo Marine can also tap on its user experience to improve the quality and design of its vessels.
What do you foresee are some of the key opportunities and trends in the Group’s key operating markets in the coming years?
Management believes that the offshore windfarm sector presents opportunities for the Group. According to the Global Wind Energy Council, the Asia Pacific region has now taken the lead in global wind power development, accounting for 50.7% of all new installations in 2019. Energy Research & Consultancy firm, Wood Mackenzie, also believes that “Floating offshore wind… could be the next frontier in wind power development in the Asia Pacific”, seeing total investment in the sector to be potentially worth US$58 billion, from the projects in the early planning stages from developers such as in Japan, South Korea and Taiwan.
The Group has a view that the surge in installation and investment in offshore windfarms is expected to drive the demand for vessels supporting the installation and construction as well as the operation and maintenance of these offshore windfarms.
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How does the Group plan to tap on the opportunities in the clean energy space?
Aside from chartering vessels to support the installation of offshore windfarms, we also target to support the operation and maintenance of offshore windfarms after they are built.
The operation and maintenance of offshore windfarms typically need to be serviced by vessels such as Crew Transfer Vessels (CTV) and Service Operation Vessel (SOV), which are specialized vessels for maintenance technicians to stay on board and to provide safe walk to work capabilities to the offshore windfarm. Each of these vessels are unique and customized for each market and/or customer, due to varying specifications of the windfarms and sea water at various countries. Currently there is a shortage in supply of these SOVs with only about 20 such vessels around the world, majority of which are operating in Europe and US.
As the windfarms are built further from the shore, SOVs are required for long distance operations. This could provide an opportunity for purpose-built SOVs to be built. Being a ship charterer and a shipbuilder with a track record, the Group has the capabilities to build such vessels, where we expect demand to grow based on the current number of offshore windfarm installations in the market.
Why should investors take a closer look at Marco Polo Marine?
Marco Polo Marine is currently trading below its net asset value of S$0.03/share which is backed mainly by hard assets including vessels and a shipyard in Batam (occupying more than 34 Ha of land).
In addition, the Group is in a strong net cash position and has generated positive operational EBITDA over the last 3 years. As we diversify more into the renewables sector, in particular servicing the offshore windfarms, management is optimistic that the Group’s asset utilisation and profitability will improve.
Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 13 July 2021 and have been republished with permission. You can read more on the SGX website.
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