Offshore marine services provider MMA Offshore Ltd (ASX: MRM) had quite a strong first half in financial year 2015, resulting in revenue and net profit up 80% and 55.8%, respectively.
Despite the gains, the stock is down 3.87% in afternoon trade to $0.99 a share. The market seems more concerned with the weaker second-half outlook, especially in light of the collapse of world oil prices and how that could affect offshore oil production in Australia and overseas. Previously, MMA Offshore roughly halved in share price since last August from around $2 to as low as $0.80 in January.
Here are the half-year results highlights:
Revenue $456.3 million, up 80% from $341.1 million
Earnings before interest, tax, depreciation and amortisation (EBITDA) $132 million, up 136.6% from $67.2 million
Net profit after tax (NPAT) $37.7 million, up 55.8% from $29.7 million
Earnings per share 10.3 cents, up 5.1% from 9.0 cps
Dividend per share interim dividend of 4 cents per share, down 27.3%
The company is expanding its overseas fleet numbers and the integration of its recently acquired Singapore-based subsidiary Jaya is progressing well. MMA Offshore now has vessels operating in Asia, the Middle East, Africa and Mexico.
In its Australian operations, lower oil prices are expected to impact ongoing drilling activity. The company also expects customers will be focusing on cost savings, which could tighten margins. This is similar to the mining services companies like Monadelphous Group Limited (ASX: MND) and Worleyparsons Limited (ASX: WOR), where there has been a decline of greenfield and exploration contract work within the iron ore industry.
Is it a good time to pick up MMA Offshore stock after the general sell-down? Being related to a cyclical commodities industry like oil and gas, long-term investors usually make better gains when buying shares at cyclical market lows.
However, picking bottoms is difficult even for the pros, so investors will want to wait until a general rise in oil prices clearly indicates that the cyclical low has passed through. Otherwise, prices could bump along the bottom for months or even years. I would suggest just watching MMA Offshore for further sustained improvement of market and company conditions.
