Company Overview

Established in 1991, Marco Polo Marine is an integrated marine logistics company with two business segments – 1) Ship Chartering Division relating to the chartering of Offshore Supply Vessels (OSV), tugboats and charters, and 2) Shipyard Division relating to shipbuilding and provision of ship maintenance, repair, outfitting, and conversion services.

1. Marco Polo Marine is a Shipyard and Shipping service provider, could you elaborate on the products/services that you provide for clients?

• Marco Polo Marine operates two main business segments:

• Shipyard – the shipyard provides shipbuilding, ship maintenance, repair, outfitting, and conversion services for shipping vessels. Located in Batam, Indonesia, it features three dry docks and occupies 34 hectares of land, with a seafront spanning 650 metres. This makes it capable of accommodating various vessel requirements.

• Ship Chartering – the offshore division oversees a fleet of 14 OSVs, which includes two Maintenance Working vessels (MWV) and 9.5 sets (19 vessels) of Tugs and Barges. The OSVs are primarily chartered by companies in the Oil & Gas (O&G) and renewables sectors, particularly for offshore wind farms. The Tug and Barge division supports the construction sector, providing transportation services for aggregate materials to Singapore.

2. What are the key growth aspects for Marco Polo Marine over the next 1-2 years?

• The Group is seeing tremendous opportunities within the offshore wind farm sector, in particular the Asia-Pacific region. The increased interest and investment in offshore wind projects will drive the demand for vessels that support these offshore wind farms' installation, construction, and maintenance.

• We are currently constructing our first Commissioning Service Operation Vessel (CSOV) which is expected to be ready in 1Q 2024. In December 2022, we entered into a Memorandum of Understanding (MOU) with Vestas Taiwan for the chartering of our CSOV.

• Leveraging on our successful track record in the Taiwan offshore wind sector, we have been actively seeking partnerships in new markets. On 6 December 2022, we took a significant step into the Japanese market by signing a landmark MOU with "K" Line Wind Service, Ltd (KWS) to explore potential vessel opportunities in the Japanese Offshore Wind Market. On 11 January 2023, we entered the South Korean market through an MOU with Namsung Shipping Co., Ltd. (Namsung) and HA Energy Co., Ltd. (HA-E).

3. What is the competitive edge for Marco Polo Marine over your industry peers?

• Marco Polo Marine successfully weathered the O&G crisis in 2017, one in which many of our peers were forced to consolidate or have been taken private. The company has since diversified its customer base beyond the O&G sector and is now one of the few integrated shipping players capable of supporting offshore wind farm projects in Taiwan. This helps the Group to reduce its reliance on the O&G sector.

• Through the Group's 49% owned subsidiary, PKR Offshore (PKRO), Marco Polo Marine now operates a diverse fleet of specialised offshore marine vessels in support of the fast-growing offshore wind market in Asia. The Group has established a strong reputation for successfully servicing major wind clients in all stages of the value chain, from development and construction to commissioning and, offshore and marine. We believe that our track record, as one of a handful of companies capable of providing this diverse suite of services, sets us apart from the competition.

• In addition, our strategically located shipyard in Batam also enables us to provide both quality and highly cost-effective ship construction and maintenance solutions to our customers in the region, allowing us to steadily gain market share over the last few years.

4. Could you elaborate more on the company’s latest collaboration with Amogy in developing Zero-Emission Solutions for its offshore wind fleet?

• Our partnership with Amogy aligns with our long-term commitment to decarbonise the ship chartering sector and reduce carbon footprint. Amogy specialises in converting ammonia into emission-free and energy-dense power solutions for electric motors, enabling zero-carbon transportation. Together with Amogy, we are exploring ways to enhance our vessels' efficiency and promote sustainability.

5. Describe Marco Polo Marine’s Recent Financial Performance.

• In 1HFY2023, the Group’s revenue doubled year-on-year (y-o-y) to S$55.9 million. The increase in 1HFY2023 revenue was driven by both the Ship Chartering and Shipyard segments.

• 1HFY2023 Revenue growth from Ship Chartering more than doubled y-o-y due to higher vessel utilisation, increased charter rates, and the consolidation of revenue from subsidiaries PT Pelayaran Nasional Bina Buana Raya (BBR) in Indonesia and PKRO in Taiwan.

• The Shipyard segment also experienced remarkable revenue growth in 1HFY2023, driven by higher contract values for ship repair projects and increased revenue from shipbuilding activities. The Group has commenced new build contracts for the construction of vessels with progressive deliveries up to 1HFY2024. Our shipyard’s average utilisation rate continued to remain robust in 2QFY2023 at 84%.

• Excluding foreign exchange losses and one-off items, the Group’s earnings before interest, taxes, depreciation and amortisation (EBITDA) nearly tripled in 1HFY2023 to S$15.5 million, compared to S$5.8 million in 1HFY2022. Overall in FY2022, the Group recorded the highest operational EBITDA of S$24.2 million since our debt restructuring in 2017.

6. Could you elaborate on the future direction for the Group’s various business segments?

• Shipyard – The Group has been stepping up marketing efforts to actively engage regional ship owners in Indonesia to secure more shipbuilding projects. We are also expanding our international customer base for ship repair and maintenance. To date, we have secured several new build contracts for the construction of vessels, with deliveries scheduled up until 1HFY2024.

• Ship Chartering – We will continue to support the Taiwan offshore wind farm market through our subsidiary, PKRO. We are currently constructing our own CSOV, which will be integrated into our fleet around 3QFY2024. This addition will significantly enhance our capabilities to effectively meet the unique requirements of the offshore wind farm industry.

7. How will the new CSOV, with expected integration in 1Q24, bring new revenue streams?

• The CSOV is specially designed to support commissioning work for the construction and maintenance of offshore wind farms. It will provide charter services based on a minimum utilisation commitment per annum to support the growing industry in Taiwan, Japan, and South Korea. Once it is completed, the CSOV is expected to generate a stream of steady chartering income for the Group over three years.

8. Is there any risk that the business is facing/likely to face and how are you mitigating it?

• There are certain risks that the Group is cognisant of, such as rising costs of inputs due to supply chain disruptions and tighter monetary policies. These factors have the potential to delay projects. To mitigate these risks, we prioritise agility and operational efficiency while maintaining financial discipline and implementing prudent cost-reduction measures.

• There are also risks stemming from geopolitical tensions. However, the mobility of the company's assets provides us with a degree of maneuverability in the unlikely event of any further escalation.

9. Sustainability and ESG have increasingly been a key focus, how is Marco Polo Marine committed towards sustainability?

• We have actively kept pace with emerging technologies aimed at addressing climate change, environmental protection and sustainable resource management while maintaining economic feasibility. We have also participated in government programs and initiatives promoting sustainable businesses.

• Recycling Efforts – the Group adopts a responsible approach to recycling non-renewable materials like steel and copper in our operations. These materials are sold to recycling mills as part of our commitment to reducing environmental strain and supporting The Sustainable Singapore Blue 2015 initiative.

• Reduced Energy Consumption – over the past three years, we have successfully reduced energy consumption by adopting inverter technology in welding sets and graving dock pumps at our shipyard. Additionally, we have fully transitioned from fluorescent and mercury lights to energy-efficient LED lights for general lighting purposes.

• Improving Shared Air Quality – to reduce sulphur dioxide emissions, we have taken measures to ensure compliance with International Organisation for Standardisation (ISO) 8127:2017, which sets the fuel standards for marine distillate fuels. The company ensures that its vessels use marine gas oil with a sulphur content not exceeding the maximum limit specified by the ISO standard and the relevant provisions of the International Convention for the Prevention of Pollution from Ships (MARPOL).

10. Why Should Investors Take a Closer Look at Marco Polo Marine?

• With the Group’s successful diversification into the offshore wind farm sector, Marco Polo Marine now serves a wider customer base in addition to traditional O&G sector, allowing our assets to enjoy higher utilisation. This enabled the Group to achieve record operational EBITDA since the debt restructuring in 2017.

• In addition, the strong net cash position of S$50.2 million (as of 31 March 2023) equips the Group with the financial flexibility to further expand our presence in the booming offshore wind farm market. This includes the ongoing construction of the CSOV, which is expected to positively contribute to our chartering business from 1QFY2024. We believe that this makes us an attractive proxy for local investors looking to capitalise on the booming offshore wind farm market in Asia Pacific.

• The Group’s valuation is also primarily backed by hard assets including cash, OSVs and our Batam shipyard. As of 31 March 2023, the Group has a net asset value of S$0.043 per share.

10 in 10 – 10 Questions in 10 Minutes With SGX-listed Companies

Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials.

This report contains factual commentary from the company’s management and is based on publicly announced information from the company.

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For more company information, visit www.marcopolomarine.com.sg

Click here for Marco Polo Marine’s latest 1HFY2023 Financial Results.