UOB Kay Hian (UOBKH) upgraded its call on Marco Polo Marine : 5LY 0% (MPM) to “buy” from “hold”, as the research house expects the integrated marine logistics group to report improving financials from increased fleet charter and utilisation rates.

It raised its target price on the stock to S$0.060 from S$0.048, reflecting a 1.3 times price-to-book ratio based on FY2023 estimates. This is two standard deviation points above the stock’s historical five-year average, which the research house noted is against the backdrop of rising charter rates and vessel utilisation rates.

The upgraded call and higher target price came after UOBKH raised its FY2023 to FY2025 revenue forecasts by 41 to 55 per cent to factor in higher charter rates.

This resulted in a 2 per cent increase in FY2024’s net profit estimate to S$17.4 million, and another 15 per cent hike in FY2025’s net profit estimate to S$19.7 million.

In a report on Monday (Jun 12), UOBKH’s analysts said they liked MPM for its improving financials in H1 FY2023, where contributions from its Indonesian subsidiary and Taiwan-based joint venture have been “commendable”.

They also highlighted the group’s strong cash position of S$53 million as at end-H1, which “provides a comfortable level of support” for the research house’s valuation.

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UOBKH said MPM stands to benefit from its expansion efforts in the offshore wind-farm sector, including the construction of a commissioning service operation vessel and the securement of newbuild contracts.

The analysts are expecting MPM to book a further increase in charter rates and utilisation levels due to the current environment of tight access to bank finance, which has in turn limited the possibility of newbuilds.

“This squeezes supply of available quality offshore service vessels, which will drive further increases in charter rates and utilisation levels moving forward,” they said.

The mainboard-listed company traded flat at S$0.053 as at 10.57 am on Monday.