By Dan Stratful (AFA)
Mermaid Marine (ASX: MRM) looks to have a good long term future with $200 billion of expenditure forecast by major oil and gas companies on a range of projects in the North West Shelf, Browse Basin and Timor Sea over the next 7 years and MRM is well placed to participate in these projects.
MRM has a good track record of profit growth, with profit growing steadily over the years from a $12.5 million profit reported in the year to 30 June 2007 (FY07), rising every year, to reach $43.2 million in the year to 30 June 2011 (FY11), a compound annual growth rate (CAGR) of 36%pa. Revenue over the same period has grown at a CAGR of 29%pa with earnings per share increasing at a CAGR of 24%pa. Return on Equity over the period has averaged 17%.
MRM reported another record result for the first half ending 31 December 2011 (1H) with a strong performance by the Vessel division offset by lower Supply Base and Slipway earnings.
1H pre-tax profit increased 39% to $37.6 million as an exceptional performance was reported from the Australian vessel fleet, and 1H revenue also increased strongly by 44%.
MRM reports that the Australian oil and gas market remains buoyant, which is driving demand for its services and delivering strong earnings growth and it sees continued demand for its vessels.
Second half earnings are expected to be lower than the 1H, however the full year result to 30 June 2012 (FY12) is again expected to be higher than previous years with Analysts' expecting around $52 million in FY12 and $59 million in FY13.
MRM provides ‘pick & shovel' exposure to the offshore oil and gas industry including major projects such as the Gorgon Project and the North West Shelf Projects. Major clients include Woodside Petroleum, BHP Billiton, Chevron and Apache.
One point to note is civil claims for damages overhang MRM regarding an incident during Hurricane "Nate" in the US in late 2011. However MRM has refuted any liability and reports indemnities and adequate insurance to limit financial loss including legal costs. Despite a recent partial settlement of the claims, MRM is aware of the possibility of further claims being made against it, however no new legal actions have been commenced.
About Mermaid Marine:
MRM is Australia's largest marine services provider to the offshore oil and gas industry specialising in the provision of marine logistics and supply base services throughout all phases of the oil and gas development cycle. With supply bases in Dampier and Broome in Western Australia MRM is ideally placed to service Australia's premier offshore oil & gas location. MRM's head office is located in Perth and it listed on the ASX in 1999.
Status: GROWTH BUY
MRM shares today traded at $2.77
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