What: For Mermaid Marine Australia Limited (ASX: MRM) a strong second half compensated for results earlier in the year, while the Singaporean Jaya acquisition exposes the company to considerable growth potential in future years.
Despite reduced earnings, full year revenue growth was excellent and thanks to its Jaya acquisition the company is now trading barely above Net Tangible Assets.
Highlights:
- Revenue from ordinary activities rose 32.3% to $594.59 million
- Very strong operational vessel performance driving growth, with revenue up 53.6% to $435.9m and EBIT up 25.4% to $55.8m (excluding earnings from Jaya)
- Net profit attributable to shareholders shrank 10.6% to $53.88 million
- Dividends stayed the same at 12.5 cents for the full year
- Net Tangible Assets of $1.95 per share (up from $1.66)
- Improved safety record, with total recordable injuries per million hours down 30% from 4.7 to 3.3
- Weakening Australian demand in some areas expected to be offset by new upcoming domestic projects
So What?
Mermaid Marine's Jaya acquisition – including fleet and shipyards – provides very strong exposure to a number of growing regions, as well as bolstering the company's integrated services model.
The continuous search for oil wealth in South-East Asia provides numerous opportunities for earnings growth over time, and the potential to land contracts on the east coast of Africa should not be underestimated.
Domestically, Mermaid Marine anticipates that demand for services in the Browse Basin should increase sufficiently to deliver growth in future years and compensate for the decline in Dampier Supply Base revenue (EBIT down 29.4% to $36.9m) this year.
Now What?
I wrote about Mermaid Marine's potential as a turnaround story back in May this year, and the company looks even more promising now.
Although its share price has recovered roughly 20% since hitting 52-week lows back then, I believe that Mermaid Marine is still a fair purchase at current prices and enjoys significant upside potential.
Although not conventionally thought of as a dividend stock, Mermaid Marine also pays a fully-franked dividend of over 5% at current prices, and I believe that's likely to improve in the future.
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