MMA Offshore Limited

MRM Details

New Agreements for MMA Privilege: MMA Offshore Limited (ASX: MRM) is engaged in marine service operations, offering logistics and supply of base services to the offshore oil and gas sector. Its’ assets consist of slipway, vessels, and supply base. As on 28^th January 2021, the market capitalisation of the company stood at ~$125.76 million. On 17^th December 2020, the company announced that it has declared bagging 2 contracts for MMA Privilege, its multi-purpose and quality vessel for a period of 228 days. The contract is expected to increase the aggregate revenue of the company by $8 million for FY21 and FY22.

Business & Trading Update: During December 2020 quarter, the company raised $80 million equity to pay and prepay its current debt, restructure the capital mix, and solidify the balance sheet. The company reduced its net debt by $93.7 million, increased debt facility duration up to January 2025 and availed $15.1 million debt concessions from its lenders. Post the completion of equity raising, the company reported 3,593 million issued shares.

FY20 Results: The company reported an increase of 14.1% YoY in revenue to $273 million and underlying EBITDA of $48.9 million, up by 76% on pcp basis for FY20. The improvement in earnings is due to MRM’s strategy to expand higher margin service offerings, efficient asset utilisation and skill base. The company held cash balance of $86.6 million as on 30 June 2020, up on pcp basis. The cash flows from operating activities stood higher at $285.23 million on FY19 at the end of FY20.

FY20 Income Statement Highlights (Source: Company Reports)

Outlook: The company foresees renewables as a market in future and many new offshore wind farms to be developed in Asia Pacific Region in next 10 years. Though oil and gas will remain a key part of its portfolio, MRM will strengthen its position in the offshore wind market in its areas of operations. It aims to target the Defence and Government sector and choose infrastructure maintenance contracts to diversify its revenue base. The company has 61% of the vessel revenue contracted and stated operating EBITDA estimate in the range of $30-$35 million for FY21.

Stock Recommendation: The stock of MRM gave a negative return of 7.89% in the past three months and a negative return of 2.68% in the past six months. The stock is currently inclined towards its 52-weeks’ low level of $0.023. The stock of MRM has a support level of ~$0.024 and a resistance level of ~$0.044. On TTM basis, the stock is trading at EV to Sales multiple of ~1.2x as compared to industry (Oil & Gas Related Equipment & Services) median of ~4.8x and is thus undervalued. Considering the trading levels, growth in top-line and underlying EBITDA for FY20, decent cash position & reduced debt, decent outlook, and guidance for FY21, and valuation on TTM basis, we give ‘Speculative Buy’ rating on the stock at the current market price of $0.033, down by 5.715% on 28^th January 2021.

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

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