MMA Offshore Limited

MRM Details

Secured a Wind Contract in Taiwan: MMA Offshore Limited (ASX: MRM) is engaged in marine logistics and supply of base services to the offshore oil and gas industry. The company operates in Vessels, Supply Base and Slipway. It undertakes a range of offshore marine activities, such as supply operations-drilling and production; construction support; survey support; subsea installation support, and tug and barge operations. The company has recently announced regarding securing three new wind contracts in Taiwan. The contracted revenue for the company will be raised by ~$7.0mn. Under this agreement, MRM will mobilise its vessels to Taiwan to provide range of wind farm support services.

1HFY21 Financial Highlights: MRM has posted a decline in its revenue to $119.9mn in 1HFY21 as compared with $130.9mn in 1HFY20. MRM has posted an increase in its EBITDA to $38.3mn in 1HFY21 as compared with $18.9mn in 1HFY20. The company has posted a net profit of $15.5mn in 1HFY21 as compared with losses of $9.74mn in 1HFY20. The company has registered a decline in its gross debt to $165.5mn at the end of 1HFY21 as compared with $273.4mn as on 2HFY20. Likewise, net debt declined to $72.6mn as on 1HFY21 as compared to $186.6mn in 2HFY20.

Gross and Net Debt (Source: Company Reports)

Key Risks: The company is present in offshore energy activities, so any adverse climatic conditions may impact the business and lead to financial losses for the company. The company operates in different countries, any fluctuation in the foreign currency may result in the financial losses for the company. 

Outlook: The company continues to develop integrated services to maximise profitability of its subsea business. The company will look for new regional developments while delivering at Taiwan renewables platform and focus on preserving cash to keep its balance sheet strong. MRM is looking to diversify by increasing revenue contribution from renewables and government and infrastructure services, going forward.

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: In the last one month, MRM has increased by 1.53% and by ~10.0% in the last three months. The current market capitalisation of MRM stands at ~$120.37mn as of 30 March 2021. The stock is currently trading below the average 52-weeks’ price level range of $0.236-$0.582. On the technical analysis front, the stock has a support level of ~$0.287 and a resistance of ~$0.38. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer median, considering non-performance from any diversified segments, which can pose a risk of under-performance of the portfolio, decline in top-line in 1HFY21 and fluctuation in the foreign currency. For this purpose, we have taken peers Origin Energy Ltd (ASX: ORG), Worley Ltd (ASX: WOR), to name a few. Considering, MRM has posted profits despite registering a decline in its revenues in 1HFY21, securing a wind contract in Taiwan, valuations, current trading levels and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.330, down by ~1.49% as on 30 March 2021.

MRM Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Invictus Energy Ltd

IVZ Details

Signed an Agreement with Republic of Zimbabwe: Invictus Energy Ltd (ASX: IVZ) is engaged in oil and gas exploration mainly in sub-Saharan African region. Its asset portfolio consists of Cabora Bassa Basin in Zimbabwe, under-explored interior rift basins in Africa. The company has recently informed the market, regarding signing a petroleum exploration development & production (PEDPA) agreement with Republic of Zimbabwe. The agreement took place between IVZ’s subsidiary, Geo Associates, and the Republic of Zimbabwe.

Raising Funds for Working Capital: IVZ has recently announced regarding conclusion of $8.0mn placement by issuing 72.72mn shares at $0.11 per share. The raised funds will be utilised towards 2D seismic campaign in SG4571, long lead drilling items for the Mzarabani-1 exploration well and general working capital.

1HFY21 Financial Highlights: IVZ has posted a higher loss of $0.99mn in 1HFY21 as compared with a loss of $0.91mn in 1HFY20. The company has registered higher corporate and professional costs, which has resulted in higher losses. The cash and cash equivalents have registered a decline to $0.93mn as on 1HFY21 as compared with $1.49mn as on 2HFY20.

Cash Position as on 31 December 2020 (Source: Company Reports)

Outlook: The PEDPA agreement with Republic of Zimbabwe will provide an opportunity for advancement of the Cabora Bassa project through the development, exploration, and production phases. The PEDPA agreement will also provide Special Economic Zone (SEZ) status for the Cabora Bassa Project, going forward. 

Stock Recommendation: In the last one month, IVZ has increased by ~39.53% and by ~114.28% in the last three months. The current market capitalisation of IVZ stands at ~$64.44mn as of 30 March 2021. The stock is currently trading above the average 52-weeks’ price level range of $0.012-$0.185. On the technical analysis front, the stock has a support level of ~$0.113 and a resistance of ~$0.150. On a TTM basis, the stock of IVZ is trading at a Price/Book Value multiple of 8.8x, higher than the industry average (Oil & Gas) of 8.2x. Considering, the spike in the stock price over past months, valuation on TTM basis, registering significant losses, raising money for its working capital, and current trading levels, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry levels and give an “Expensive” rating on the stock at the current market price of $0.120, down by ~11.11% as on 30 March 2021.

IVZ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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