Singapore’s UOB Kay Hian has added offshore player Marco Polo Marine to its Alpha Picks portfolio on the back of improved sentiment in the oil and gas market.
At the same time, China’s largest privately owned shipbuilder Yangzijiang Shipbuilding has been removed from the portfolio.
“We removed…Yangzijiang Shipbuilding, as we expect the next 3-4 months to be a relatively quieter period for order win announcements,” the bank said.
The investment bank’s Alpha Picks are its high-conviction calls, usually around 10 to 12 companies, selected by its Singapore-based research team.
UOB Kay Hian analyst Heidi Mo said Marco Polo had been added to the portfolio as she expects the company to “benefit from minimal newbuilds and increased offshore activity”.
“Though the surge in demand should lead to newbuilding, vessel supply is set to remain constrained on the horizon, while securing financing remains challenging, resulting in limited possibility of newbuilds,” she added.
Mo said the Asia Pacific offshore wind farm market was also attracting increased investments in offshore wind projects.
“With its growing presence in the region, such as recent partnerships with Japan and South Korea, MPM [Marco Polo Marine] is placed in a favourable position,” she said.
Mo highlighted Marco Polo’s construction of a commissioning service operation vessel to support commissioning work for the construction and maintenance of offshore wind farms.
“This will provide charter services to support the Taiwan, Japan and South Korea markets, boosting ship chartering revenue,” she said.
“The CSOV’s expected completion in the third quarter of 2024 will be timely to meet the growing [demand] from the offshore wind farm industry in Asia.”
In a report earlier this year, UOB Kay Hian described Marco Polo chief executive Sean Lee as one of the best “value for money” chief executives on the Singapore Exchange.
Regarding CEO pay versus share performance, UOB Kay Hian’s Adrian Loh said Lee was the “standout” candidate, with the company seeing a share price gain of 52% in 2022 versus his salary of SGD 750,000 ($553,152).
Growing demand for offshore support vessels helped Marco Polo post a 47% increase in third-quarter gross profit to SGD 14.2m ($10.4m) from April to June 2023.
Marco Polo said the OSV market continues to recover, driven by favourable energy prices, increased offshore field development and supply-side constraints.
“There has been a notable increase in demand for OSVs during the quarter, leading to an eight-percentage point year-on-year rise in utilisation rates, reaching a 92% operating capacity for the period,” the company said.
