1. business and industrial
2. company
3. annual report

Regional Daily, 6 January 2015
5
Regional Daily
Ideas Troika
Top Stories
Rukun Raharja (RAJA IJ)
Utilities
BUY IDR1,440 TP: IDR2,000
Mkt Cap : USD117m
Pg2
Initiating coverage on Rukun Raharja (RAJA) with a BUY and DCF-based TP
of IDR2,000 (40% upside). Key selling points are: i) USD earner with
inelastic product demand, ii) solid management team, iii) Strong earnings
growth trajectory (CAGR of 54.7% for 2011-2016).
Analyst: Norman Choong ([email protected])
Yangzijiang (YZJSGD SP)
Industrial – Shipbuilding
BUY SGD1.21 TP: SGD1.68
Mkt Cap : USD3,489m
Pg3
Yangzijiang won USD388m of contracts in 4Q14. It stands to benefit from
stronger USD and lower oil prices. Valuations are inexpensive at c.6x FY15
P/E and 1x P/B.
Analyst: Lee Yue Jer, CFA ([email protected])
AsiaVantage
Pg4
We highlight three themes for 2015 (strong USD, weak oil prices, and low
interest rates) and focus on their beneficiaries (exporters, transport, and
property) but are cautious on ASEAN consumer plays as the governments
use the opportunity to reduce diesel subsidies, thus blunting the benefits.
Analyst: Athaporn Arayasantiparb, CFA ([email protected])
Pg5
From Healthcare To US Interest Rates To China Railway
Other Key Stories
Regional
Monthly Compass
Analyst: Leng Seng Choon CFA ([email protected])
Malaysia
Perisai Petroleum Teknologi (PPT MK)
Energy & Petrochemicals
SELL MYR0.46 TP: MYR0.35
Singapore
Marco Polo Marine (MPM SP)
Energy & Petrochemicals
BUY SGD0.28 TP: SGD0.60
See important disclosures at the end of this report
Pg6
Idle Assets Still a Concern
Analyst: The Research Team ([email protected])
Pg7
Multiple Positive Surprises In Multi-Year Contracts
Analyst: Lee Yue Jer, CFA ([email protected])
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1
Initiating Coverage, 5 January 2015
Rukun Raharja (RAJA IJ)
Buy
Utilities
Market Cap: USD117m
Target Price:
Price:
IDR2,000
IDR1,440
Macro
Risks
Two-Pronged Approach To Growth
Growth
Value
Rukun Raharja (RAJA IJ)
Price Close
Relative to Jakarta Composite Index (RHS)
1,640
217
1,440
190
1,240
164
1,040
137
840
110
640
84
440
30
57
25
15
Nov-14
Sep-14
Jul-14
May-14
Mar-14
5
Jan-14
Vol m
10
Source: Bloomberg
Avg Turnover (IDR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (IDR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Sentosa Bersama Mitra
Blackgold Resources
Sunmax Enterprise
3,257m/0.26m
40.0
535 - 1,440
34
1,019
29.0
19.9
16.6
Share Performance (%)


Spillover effect on infrastructure push; power generation another
key focus area. In our opinion, the urgency to address Indonesia’s
electricity demand is even higher following the Government’s plan to
accelerate infrastructure development in the country – which means that
the supply of electricity has to keep up with demand. President Joko
Widodo (Jokowi) has announced his plan to add an extra 35,000
megawatts (MW) by 2019, almost doubling the country’s current capacity
of 49,000MW. We foresee a higher number of foreign direct investment
(FDI) and independent power producers (IPP) participating in power
generation, which would indirectly benefit RAJA. Note that one of its
business strategies is to venture into power generation since it already
has a supply of gas – which makes it a suitable candidate for IPP.
Strong EBITDA, earnings and balance sheet. We expect the company
to book a 22.6% 5-year CAGR in EBITDA for 2011-2016F and 54.7% 5year CAGR in earnings for 2011-2016F, driven by higher pipe utilisation
and monetisation of lucrative projects (additional 46 million standard
cubic feet per day (mmscfd) of gas transmission by 2016). We expect
2016 ROAE to reach 23.6% vs 2014F’s 17.3%.
BUY with a DCF-based TP of IDR2,000. Our DCF-based TP of
IDR2,000 assumes a WACC and long-term growth of 11.3% and 3%
respectively. RAJA is currently trading at 11.4x / 7.1x 2015-16 P/Es.
YTD
1m
3m
6m
12m
Absolute
6.7
34.6
12.9
146.2
128.6
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Relative
6.7
33.6
8.4
139.7
107.8
Total turnover (USDm)
116
137
205
252
267
Reported net profit (USDm)
5.2
5.8
8.5
10.2
16.4
compliant
Recurring net profit (USDm)
[email protected]
Dony Gunawan
3.1
2.3
8.5
10.2
16.4
(23.4)
261.6
20.7
60.6
0.00
0.00
0.01
0.01
0.02
0.000
0.000
0.000
0.001
0.002
Recurring P/E (x)
38.3
49.9
13.8
11.4
7.1
P/B (x)
2.89
2.63
2.19
1.87
1.52
P/CF (x)
23.1
37.3
15.0
7.5
4.8
0.0
0.0
0.0
1.1
1.7
EV/EBITDA (x)
11.3
11.0
8.7
7.6
5.3
Return on average equity (%)
20.4
13.5
17.3
17.6
23.6
Net debt to equity (%)
75.9
78.4
48.1
68.1
38.6
0.0
0.0
0.0
Recurring EPS (USD)
DPS (USD)
Dividend Yield (%)
Emerson L. Widijanto
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report
Dec-16F
227.0
Recurring net profit growth (%)
Norman Choong +6221 2598 6888 ext 61413


3

.
2
0
.
2
0
0
.
2
0
0
.
We initiate coverage on Rukun Raharja (RAJA) with a BUY
0
and DCF-based TP of IDR2,000 (40% upside). Its key selling 0
0
points are: i) it is a USD earner with inelastic product
demand, ii) its solid management team has strong B2B and
B2G relationships, and iii) it started from a low base and has
a strong earnings growth trajectory (CAGR of 54.7% for
2011-2016), driven by gas distribution expansion and a
lucrative
gas transmission
project
that could
by
 The largest
non state-owned
enterprise
(SOE)take
gas place
distribution
the company.
end of 2015.
RAJA is a gas distribution and transmission company with a
market share of ~5%. It has a similar business model to state-owned
Perusahaan Gas Negara (PGAS) (PGAS IJ, BUY, TP: IDR6,600), albeit
on a smaller scale. PGAS’ market share in the distribution segment is
~80%. RAJA had its back-door listing back in 2010 and has expanded
rapidly – it has a 2011-2014F net profit CAGR of 66.1%.

20




Source: Company data, RHB estimates
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2
Company Update, 6 January 2015
Yangzijiang (YZJSGD SP)
Buy (Maintained)
Industrial - Shipbuilding
Market Cap: USD3,489m
Target Price:
Price:
SGD1.68
SGD1.21
Macro
Risks
Riding Positive Macro Trends
Growth
Value
Yangzijiang Shipbuilding (YZJSGD SP)
Relative to Straits Times Index (RHS)
109
1.25
105
1.20
102
1.15
98
1.10
94
1.05
90
1.00
87
0.95
83
0.90
100
90
80
70
60
50
40
30
20
10
79

Nov-14
Sep-14
Jul-14
May-14
Mar-14
Source: Bloomberg
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
8.19m/6.33m
13.2
39.1
1.01 - 1.24
64
3,832
Ren Yuanlin
Lido Point Investments
Hong Kong Hengyuan Invt
26.0
10.3
8.7
Share Performance (%)
YTD
1m
3m
6m
Absolute
0.4
3.4
6.1
11.0
12m
1.7
Relative
0.4
2.1
1.9
7.9
(4.3)


41 shipbuilding contracts worth USD1.8bn. Yangzijiang entered into
nine new shipbuilding orders in 4Q14, bringing order wins for the year to
USD1.8bn, consisting of 41 vessels. These comprised two 10,000
twenty-foot equivalent unit (TEU) containerships, four 36,500
deadweight-tonne (dwt) bulk carriers, two 2,700TEU containerships and
one 64,000dwt bulk carrier. These vessels are expected to be delivered
in 2015-2017. Additionally, the company granted four options for two
36,500dwt bulk carriers and two 2,700TEU containerships.
1.8-year orderbook on hand. 2014’s USD1.8bn close was within the
company’s USD1.5bn-2.0bn target range, though falling short of our
USD2.2bn forecast. We calculate the current orderbook, net of 4Q14
recognitions, to be c.USD4.5bn, which would cover 1.81 years of FY15F
shipbuilding revenue. With a total USD4.7bn of orders in the last two
years, Yangzijiang’s yards are relatively full and we moderate our order
win expectations to USD2.0bn going forward.
Positive macro trends. With sales revenues in USD and costs in CNY,
the strengthening USD should benefit Yangzijiang. The lower oil prices
are a strong positive for global economic growth, which should increase
trade flows and demand for shipping services. As a global leader in
shipbuilding, Yangzijiang stands to benefit from this macro trend.
Maintain BUY with SGD1.68 TP. We continue to like Yangzijiang as the
most efficient shipyard in China, which combines the lowest cost
structure with strict discipline on order intakes. Maintain BUY with a
SOP-based TP of SGD1.68, which values the shipbuilding business at
8x FY14F trough earnings. Current valuations are inexpensive at c.6x
FY15/FY16F P/Es, c.3x EV/EBITDA, with a 4.3% dividend yield. We also
highlight that the company is trading near book value, on c.16% ROE.
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
Total turnover (CNYm)
14,799
14,339
14,532
16,988
18,500
Reported net profit (CNYm)
3,581
3,096
3,452
3,466
3,698
Recurring net profit (CNYm)
3,581
3,096
3,103
3,466
3,698
Recurring net profit growth (%)
(10.0)
(13.5)
0.2
11.7
6.7
Recurring EPS (CNY)
0.93
0.81
0.81
0.90
0.96
DPS (CNY)
0.24
0.24
0.24
0.24
0.24
Recurring P/E (x)
6.06
7.01
6.99
6.26
5.86
P/B (x)
1.40
1.22
1.07
0.95
0.85
Jesalyn Wong +65 6232 3872
P/CF (x)
11.7
7.1
7.2
6.2
[email protected]
Dividend Yield (%)
Shariah compliant
Lee Yue Jer, CFA +65 6232 3898
[email protected]
na
4.3
4.3
4.3
4.3
4.3
EV/EBITDA (x)
3.71
3.66
4.23
3.40
2.91
Return on average equity (%)
25.1
18.6
18.1
7.0
19.3
8.7
Net debt to equity (%)
Our vs consensus EPS (adjusted) (%)
See important disclosures at the end of this report


2

.
1
0
.
2
0
0
.
3
0
0
Yangzijiang announced that it entered into nine new shipbuilding .
0
contracts in 4Q14, bringing total effective order wins for 2014 to 0
USD1.8bn. Maintain BUY with a SGD1.68 TP (39% upside). We estimate 0
the current outstanding orderbook at USD4.5bn, or 1.8 years of
shipbuilding revenue. Yangzijiang stands to benefit from a strong USD
and stronger global growth spurred by cheap oil. Valuations are
inexpensive at c.6x FY15/FY16F P/Es, with a 4.3% dividend yield.

Jan-14
Vol m
Price Close
1.30




Source: Company data, RHB estimates
18.1
16.1
net cash
27.9
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15.3
net cash
28.7
3
Strategy, 6 January 2015
AsiaVantage
Risks
The New Abnormal


2

2

2




Macro
Growth
Value
2
P/E band chart for S&P 500 index
The only thing we can be sure of in 2015 is that there will be plenty of
surprises. Once again, we enter uncharted territory as the Federal
Reserve ends QE, while Japan announces a new round of stimulus.
Many indicators indicate that the USD will remain strong, while oil
prices could stay low. Transport and export stocks may benefit at the
expense of energy stocks in this environment.

Source: Bloomberg

P/E band chart for Nikkei index

Source: Bloomberg
P/E band chart for Shanghai index

Source: Bloomberg
Athaporn Arayasantiparb, CFA, CFA
+65 6232 3884
[email protected]
See important disclosures at the end of this report
Strong dollar. The end of quantitative easing (QE) in the USA and QElike policies by other large economies such as Japan supports the thesis
for further strengthening of the USD against Asian currencies, which is
likely to remain positive for Asian exporter and transport stocks.
Weak oil prices. During our marketing trip, many investors felt that oil
prices would be low at USD70/bbl in the near future due to the strong
USD (in which oil prices are denominated) and strong US inventories.
Domestic consumption stocks in some Asian markets may not benefit as
much as they should, due to country-specific reasons in Indonesia
(diesel subsidy reduction), Thailand (gradual floating of refined product
prices) and Malaysia (goods and services tax (GST) implementation)
and a shift towards managed float pricing for refined products.
Low interest rates. In our view, any increase in interest rates would be
relatively mild, as several countries in Asia such as China, Japan, Korea
and Thailand are still intent on propping up their economies. China led
the pack with a surprise rate cut in Nov 2014. Input costs and inflation
are lower than they would be if oil prices were at normal levels. The low
interest rate environment will be negative for banks but positive for
defensive sectors such as power, telecoms, and REITs. The definitions
of defensives vary for each country.
Country-specific themes. Apart from this, we identify and discuss three
country-specific themes in this report, namely: i) HK-Shanghai Stock
Connect, which should lead to a convergence in valuations between the
two markets, ii) a recovery in Thai tourism, and iii) the bank consolidation
theme in Malaysia.
Company Name
Price
Target
P/E (x)
P/B (x)
Yield (%)
Dec-15F
Dec-15F
Dec-15F
Rating
Bukit Asam
IDR12,500
IDR14,400
11.6
2.8
3.9
BUY
China Lilang
HKD4.88
HKD7.45
7.6
1.7
8.9
BUY
Kossan Rubber Industries
MYR4.47
MYR5.12
14.8
3.0
2.2
BUY
M1
SGD3.61
SGD4.40
17.0
8.2
5.8
BUY
Sarana Menara Nusantara
IDR4,150
IDR5,000
35.9
7.4
-
Thai Airways International
THB14.60
THB18.87
na
0.7
- TRADING BUY
Thai Union Frozen Products
THB90.50
THB78.50
17.3
2.3
- TRADING BUY
Thoresen Thai Agencies
THB16.90
THB24.80
11.8
0.8
-
BUY
BUY
Source: Company data, RHB estimates. Date as of 30 Dec 2014.
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Regional Monthly, 5 January 2015
Monthly Compass
From Healthcare To US Interest Rates To China Railway
DBS is our Top Pick for Singapore bank on US Fed
Fund rate normalisation
What a year 2014 was, with crude oil prices crashing in the last few
months, a number of air crashes and the Ebola pandemic gaining
global attention. As we entered 2015, we are particularly excited about
the impending hike in US interest rates (which will likely benefit DBS),
the continued robust demand for medical gloves (we upgraded
Supermax last week), and the restructuring of China railway sector to
improve competitiveness (CNR is a beneficiary). Please read page 2 of
this report for the meaty details.
Indonesia AirAsia flight QZ8501 crashed on 28 Dec 2014, and a number of
victims have been found thus far. We extend our deepest condolences and
prayers to the victims, their families and friends. This incident could cap the
yield upside expectations. Although this will likely be more pronounced for
Indonesia Air Asia (IAA), we do not rule out that this could possibly impact
yields for the whole AirAsia group, notably Malaysia AirAsia (MAA). Despite
the incident, we like AirAsia (AIRA MK, BUY, TP: MYR3.47), with its TP
pegged to 12x FY15 EPS. AirAsia : Prayers For QZ8501
The Ebola fears and the recent discovery of H7N9 virus in China, though
unfortunate, will drive demand for medical gloves, and we maintain
overweight on the Malaysian glove manufacturers. We upgraded Supermax
(SUCB MK, BUY, TP: MYR1.87) as its recent share price weakness has
made its valuation attractive. Supermax : Value In Retracement
Source: Bloomberg
st
nd
We like Shimao’s property exposure to 1 /2 -tier
China cities.
We see 2015 as another busy year for Malaysia contractors. There is a long
list of mega public infrastructure projects, particularly the MYR73bn Klang
Valley MRT. For the Klang Valley MRT project, our Top Pick is Gamuda
(GAM MK, BUY, TP:MYR5.35). Construction : 2015 Poised To Be Another
Busy Year For Contractors
Expectations are for the US interest rates to normalise in 2015. As there is a
strong correlation between the US and Singapore interest rates, we expect
Singapore Interbank Offered Rate (SIBOR) to trend up as well. This will be
positive for the net interest margin (NIM)s of Singapore banks, particularly
DBS (DBS SP, BUY, TP: SGD22.60). We also upgraded OCBC (OCBC SP,
BUY, TP: SGD11.70) as the dilution from rights issue has been priced in and
its integration with OCBC-Wing Hang is progressing well. DBS : NIM
Recovery To Support Price Outperformance
Leng Seng Choon, CFA +65 6232 3890
[email protected]
There were anonymous messages from Weibo suggesting that Shanghai
may remove the Home Purchase Restriction (HPR) by the end of March. The
Shanghai local government, however, insisted the existing policies would
remain unchanged. On the other hand, Beijing lifted the provident fund loan
ceiling to CNY1.2m (from CNY0.8m) for first-time buyers purchasing a
property under 90 sq m, effective from 1 Jan 2015. These developments
raised the hope of policy relief in first-tier cities. We believe 1st/2nd-tier cities
property market will outperform in 2015. We prefer Shimao (813 HK, BUY,
TP: HKD20.30) and KWG (1813 HK, BUY, TP: HKD7.60).
Hong Kong Research
Indonesia Research
Malaysia Research
Singapore Research
Thailand Research
We are positive on the merger of CNR/CSR into a new company called
CRRC. This could be read as a signal for China’s overseas rolling-stock
export strategy. The new entity is expected to win more international
contracts. We like CNR (6199 HK, BUY, TP: HKD8.47). CSR-CNR Merge
Into CRRC Via Share Swap
Source: Bloomberg
See important disclosures at the end of this report
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5
Company Update, 6 January 2015
Perisai Petroleum Teknologi (PPT MK)
Energy & Petrochemicals - Offshore & Marine
Market Cap: USD154m
Sell (Maintained)
Target Price:
Price:
MYR0.35
MYR0.46
Macro
Risks
Idle Assets Still a Concern
Growth
Value
Perisai Petroleum Teknologi (PPT MK)
Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
1.86
123
1.66
111
1.46
98
1.26
86
1.06
73
0.86
61
0.66
48
0.46
36
0.26
60
23

MOPU and DLB still unutilised. Two of Perisai Petroleum Teknologi’s
(Perisai) assets are still idle with no contract wins in sight. Management
has guided that Perisai is tendering for jobs for its mobile offshore
production unit (MOPU), Rubicone, as well as its derrick lay barge
(DLB), Enterprise 3. However, we remain cautious on the prospect of
obtaining new contracts as these two assets are old and of lower
specifications. In a low crude oil price environment, we believe efficiency
and cost-saving measures are key to obtaining contracts. Therefore, we
believe that Perisai faces an uphill battle to win contracts for the two
aging vessels. Note that as we did not factor in any job wins for the two
vessels, an unexpected contract win could provide an earnings upside
for Perisai.

Can PP102 get a contract? Recall that Perisai’s first jack-up rig, Perisai
Pacific 101 (PP101), was chartered by Petronas for three years starting
from Aug 2014. Perisai has two more jack-up rigs to be delivered in the
middle of 2015 and 2016. According to IHS Petrodata, which provides a
weekly rig count, South-East Asia’s rig utilisation and average day rates
are coming down slightly MoM and YoY. This is due to the lower crude
oil price resulting in field operators scaling back on their capex and
drilling activities. In addition, there are 10 jack-up rig contracts that are
due to expire in 2015 in Malaysian waters, which we believe may put
further pressure on PP102 obtaining a charter. We have given the
company the benefit of the doubt and factored in 100 days of charter for
2015, but we recognise that this presents a downside risk if the charter
contract does not materialise.
40
30
Nov-14
Sep-14
Jul-14
May-14
Mar-14
10
Jan-14
Vol m
20
Source: Bloomberg
9.42m/2.77m
328.3
-23.9
0.40 - 1.72
68
1,193
12.1
11.5
6.7
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
0.0
(14.2)
(64.5)
(71.2)
(71.0)
Relative
0.5
(14.4)
(59.7)
(64.2)
(66.5)
Shariah compliant

Maintain SELL with a lower TP of MYR0.35. We make no changes to
our FY14 earnings forecast but lower our FY15/FY16 estimates by
28%/23% respectively, as we lower our charter assumptions for the idle
assets as well as PP102. We value Perisai at 8x FY15 P/E, the lower
end of our oil and gas sector valuation multiples given the diminishing
prospects of new contracts for its idle assets and forthcoming new rigs in
the current weak crude oil price environment. We arrive at a lower TP of
MYR0.35 (from MYR0.88). Maintain SELL.
Forecasts and Valuations
Dec-12
Dec-13
Dec-14F
Dec-15F
Dec-16F
128
112
73
228
401
Reported net profit (MYRm)
92
72
2
52
101
Recurring net profit (MYRm)
68
62
2
52
101
328.8
(9.0)
(97.4)
3067.1
94.5
0.06
0.06
0.00
0.04
0.08
7
8
331
10
5
1.02
0.55
0.60
0.57
0.51
P/CF (x)
4.1
37.3
26.3
10.2
4.1
EV/EBITDA (x)
7.6
7.0
46.0
15.7
9.8
Return on average equity (%)
22.7
10.4
0.2
5.6
10.0
Net debt to equity (%)
56.2
29.0
Total turnover (MYRm)
The Research Team +603 9207 7680
[email protected]
Kong Ho Meng +603 9207 7620
[email protected]
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
3
0
0
Perisai continues to be weighed down by its idle assets, with its two .
0
jack-up rigs yet to be delivered and potentially facing difficulties in 0
securing charter contracts. Reiterate SELL due to a lack of earnings 0
visibility, with a lower MYR0.35 TP (23.9% downside), based on 8x
FY15F P/E. We reduce our FY15/FY16 earnings estimates by 28%/23%
respectively.
50
Avg Turnover (MYR/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (MYR)
Free float (%)
Share outstanding (m)
Shareholders (%)
Emas Offshore
HCM Logistics
EPF




Recurring net profit growth (%)
Recurring EPS (MYR)
Recurring P/E (x)
P/B (x)
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB estimates
129.2
143.6
142.1
(98.5)
TM (71.0)
(43.6)
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Company Update, 6 January 2015
Marco Polo Marine (MPM SP)
Buy (Maintained)
Energy & Petrochemicals - Oil & Gas Services
Market Cap: USD70.7m
Target Price:
Price:
SGD0.60
SGD0.28
Macro
Risks
Multiple Positive Surprises In Multi-Year Contracts
Growth
Value
Marco Polo Marine (MPM SP)
Price Close
Relative to Straits Times Index (RHS)
0.43
110
0.41
104
0.39
99
0.37
93
0.35
88
0.33
82
0.31
77
0.29
71
0.27
66
0.25
3
60


2

Nov-14
Sep-14
Jul-14
May-14
Mar-14
1
Jan-14
Vol m
1
Source: Bloomberg
0.05m/0.04m
96.4
114.3
0.27 - 0.41
40
337
59.7

5+2+2-year accommodation work boat (AWB) contract. The first
contract is a 5-year bareboat charter contract worth USD27m for an
AWB to start in April in Malaysian waters, with 2-year plus 2-year
extension options. This comes as a positive surprise, and prompts us to
raise our FY15/FY16 earnings forecasts by 10%/11% respectively.
Four long-term vessel charters renewed. The four vessels chartered
are: i) MP Prelude and MP Premier – plying in Indonesia till end-August,
ii) OMS Endurance in Australian waters on a renewed bareboat contract
for three years (with two 1-year extension options) starting this month,
and iii) MP Spectrum in the Gulf of Thailand on a renewed contract for
two years, which began in Nov 2014.
Entering the Vietnamese market. At the same time, Marco Polo
Marine’s latest anchor handling tug supply (AHTS) MP Prowess began a
maiden 1-year bareboat contract worth USD4m in Nov 2014, with a 1year extension option. This AHTS is being chartered into Vietnamese
waters, marking Marco Polo Marine’s inaugural foray into this market.
Compelling valuations with focus on shallow-water activity in
cabotage-protected markets. The new and renewed contracts bear
testament to the resilience of shallow-water vessels in cabotageprotected Indonesia and Malaysia, with rates holding firm from a year
ago. Together, these six contracts provide long-term earnings and cash
flow visibility for the company. Marco Polo Marine is currently trading at
0.5x book value and at 2-6x FY15-17F P/Es. We see earnings rebound
as the main near-term catalyst, with profits rebounding 45% this year
and doubling in FY16F. Maintain BUY, with our SGD0.60 TP pegged to
1.2x P/BV (or 6x FY15F P/E), implying a 114.3% upside.
Share Performance (%)
YTD
1m
3m
6m
12m
Absolute
1.8
(1.8)
(21.1)
(21.1)
(27.3)
Relative
1.6
(3.2)
(24.7)
(24.1)
(34.9)
Forecasts and Valuations
Total turnover (SGDm)
Reported net profit (SGDm)
Recurring net profit (SGDm)
Sep-13
Sep-14
Sep-15F
Sep-16F
94
113
84
152
Sep-17F
181
22.3
10.0
16.7
34.2
43.7
16.6
11.5
16.7
34.2
43.7
(22.5)
(30.4)
44.8
104.7
27.9
Recurring EPS (SGD)
0.05
0.03
0.05
0.10
0.13
DPS (SGD)
0.01
0.01
0.00
0.01
0.02
Lee Yue Jer, CFA +65 6232 3898
Recurring P/E (x)
5.76
8.27
5.72
2.79
2.18
[email protected]
P/B (x)
0.59
0.57
0.52
0.44
0.38
P/CF (x)
5.96
4.91
2.06
3.82
1.59
2.9
5.0
0.0
3.5
7.2
7.82
5.31
5.85
4.01
Recurring net profit growth (%)
Shariah compliant
Jesalyn Wong +65 6232 3872
Dividend Yield (%)
[email protected]
EV/EBITDA (x)
6.05
Return on average equity (%)
14.7
6.0
9.4
17.0
18.6
Net debt to equity (%)
59.0
89.5
81.5
153.2
119.7
0.0
0.0
0.0
Our vs consensus EPS (adjusted) (%)
Source: Company data, RHB estimates
See important disclosures at the end of this report


2

.
2
0
.
3
0
0
.
3
0
0
Marco Polo Marine secured multi-year contracts worth >USD46m for six .
0
vessels. Maintain BUY and SGD0.60 TP (114.3% upside). The first is a 0
USD27m AWB contract, followed by a maiden AHTS contract in Vietnam 0
(USD4m) and four vessel charters (>USD15m). These contracts provide
long-term earnings and cash flow visibility. Valuations are compelling
at 2-6x FY15-17F P/Es and 0.5x P/BV for a profitable company.
2
Avg Turnover (SGD/USD)
Cons. Upside (%)
Upside (%)
52-wk Price low/high (SGD)
Free float (%)
Share outstanding (m)
Shareholders (%)
Nautical International




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