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Macro Polo Marine Ltd Rebukes Media Report On Its Solvency, But Its Financials Still Look Shaky

Local newswire The Straits Times reported last Thursday that Macro Polo Marine Ltd (SGX: 5LY) could be facing the risk of bankruptcy while the company embarks on a plan to restructure the maturity of S$50 million worth of its bonds.

But on Friday, the company announced that the news article was actually misleading. The Straits Times article quoted  Macro Polo Marine as stating that there may be “substantial doubt on its ability to operate as a going concern.”

Macro Polo Marine mentioned in its announcement that the aforementioned sentence was merely “one of the customary risk factors” disclosed in its debt restructuring plan. Marco Polo Marine added (emphasis from the company):

“This should NOT be construed that the Company presently is unable, or has doubts on its ability, to operate as a going concern.”

Macro Polo Marine also reiterated that its business fundamentals are intact and that the company has produced positive EBITDA (earnings before interest, taxes, depreciation and amortisation) for its fiscal year ended 30 September 2015 (FY2015), and the first three-quarters of FY2016.

However, it’s worth noting that the company has clocked a loss of S$7.5 million in the first three-quarters of FY2016. According to S&P Global Market Intelligence, Marco Polo Marine’s free cash flow was also a negative S$25.3 million for the same timeframe.

Although the company seems confident that it will be strong enough to weather the storm even as it proposes a restructuring of its debt, its financial picture does not look too healthy. Marco Polo Marine still has a net debt to equity ratio of 1.4 as at 30 June 2016 and its interest coverage ratio was just 1.8 in FY2015, down significantly from 3.0 in FY2014.

Investors might want to keep a close on the company’s developments, including the outcome of its debt restructuring. The company has seen its share price fall by 70% since the start of 2016, from S$0.20 to just S$0.062 at the moment. At a price of S$0.062, Marco Polo Marine has a market capitalization of S$23.2 million and is valued at just 0.1 times its net tangible book value.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.