The lowered estimates come after MPM reported lower-than-expected earnings in the 1HFY2025. For the six months ended March 31, MPM’s revenue fell by 14% y-o-y to $53 million. The lower figure factored in the temporary loss of third-party shipyard revenue during the construction period of its commissioning service operation vessel (CSOV). MPM’s ship chartering revenue decreased by 3% y-o-y to $32 million.
That said, Yeo continues to like the stock as he sees MPM’s earnings drivers remaining intact. The analyst, who has a “buy” call on MPM, believes that the deployment of its new CSOV will spark higher growth and an increased bottom line.
“The vessel has secured charters at robust rates for the next three years, and is taking on more orders beyond that,” says Yeo in his June 5 report.
The analyst also sees MPM’s shipyard revenue to improve thanks to higher capacity from its fleet size and shipyard capacity. MPM’s fleet is anticipated to expand to include two crew transfer vessels (CTVs) for Siemens Gamesa’s offshore wind projects in Taiwan and South Korea from 2024 to 2026, while it has a fourth new dry dock which adds shipyard capacity.
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Plus, with its CSOV now deployed, the higher shipyard capacity should support a revenue turnaround in the subsequent quarters, says Yeo.
Despite his reduced earnings forecast, Yeo expects MPM’s gross profit margin (GPM) to improve due to stronger ship chartering margins from attractive CSOV charter rates.
In the 1HFY2025, MPM’s GPM rose by 5.3 percentage points to 41.3% from the reduction of re-chartering third-party vessels.
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The company’s shipyard revenue in 2HFY2025 is expected to improve sequentially as well thanks to higher capacity.
As Yeo’s estimates are predicated on improved charter and utilisation rates, key risks include the underperformance of these aspects.
Looking at MPM’s balance sheets, capex is expected to taper in FY2026 and FY2027, supporting higher free cash flow yields of 15.5% and 17.3%, respectively.
MPM’s 1HFY2025 net profit now forms 44% of Yeo’s revised estimates.
As of 11.33am, shares in MPM have stood pat trading at 4.5 cents.
