Mermaid Marine (MRM) delivered a great 1H10 result, with revenue up 18% to $93m and PBT up 31% to $20.3m. An effective tax rate of 1.5% (reduced by the Governments Investment Allowance) gave the bottom line a further boost, and NPAT jumped 63% on 1H09 and 41% on 2H09 to $20.0m (or 10.8 cents per share).
We struggle to find a Company better positioned. It is directly exposed to the rapidly growing offshore oil & gas market and has invested wisely to meet this demand. The biggest risk to MRM is a reduction in vessel and Supply Base utilisation unlikely in our view while it remains exposed to one of the busiest regions in Australia. Our DCF valuation is $3.19, which is a more appropriate 15x FY11 earnings. Accordingly we upgrade to Buy.
MRM Price at posting:
$2.71 Sentiment: Buy Disclosure: Held
