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Market research on Mariner Finance plc


Mariner Finance plc (“MRN”) was set-up as a financing vehicle for the Mariner Group. The Group is predominantly focused in the investment, development, and operation of sea terminals, namely in Riga, Latvia. Additionally, the Group owns and operates a real estate property in Latvia.

The Group operates the Riga Free Port No. 48 under a port concession licence which expires on March 22, 2047. Apart from the licence, MRN owns all yards within the boundaries of the terminal (excluding the quay), together with all underlying communications, warehousing facilities, parking, and areas surrounding said warehouses. The real estate property in Latvia consist of a five-storey commercial and office building having circa 3,880m2 of rentable space. As at FY19, the property was valued at €5m.

The container market is mainly characterised by the leading vendors including China Ocean Shipping Company, CMA CGM, Evergreen Marine Corporation (Taiwan) Ltd., Hapag Lloyd, Hyundai Merchant Marine Co. Ltd., Kawasaki Kisen Kaisha Ltd., Maersk Line, Mediterranean Shipping Corporation S.A., Mitsui O.S.K. Lines, Ltd, and Westfal-Larsen Shipping A/S.

As per the ‘Global Container Fleet Market’ report, despite the current downturn caused by an unprecedented pandemic, the global container market is expected to grow from USD 18 billion in 2019 to USD 30.7 billion by the end of 2025. This translates into a compound annual growth rate (CAGR) of 9.3%.

MRN issued a €35 million unsecured bond in 2014. Out of this, €15m were utilised during the years as investment within the Group’s port operations, with the remainder allocated to bank loans refinancing. The bond matures in 2024 and pays a 5.3% coupon. As at yesterday’s closing prices, the bond is trading at €105, which renders a yield to maturity of 3.9%.

COVID-19 impact on the Group’s business

The impact of the COVID-19 pandemic is far-reaching. Nonetheless, in line with the Group’s FAS (dated 27 May), Mariner reported that it continued to operate normally despite the current situation. Given that the magnitude of the impact brought about by the outbreak is not yet fully known, the Group noted that it is not in a position to accurately forecast the extent of the impact such events will have on its operations.

However, in view of the economic downturn caused by the pandemic, the Group revised its projections for FY20 and based these revisions on a stressed scenario. Notwithstanding this, the Group is still expected to operate at satisfactory profitability levels and generate sufficient liquidity to honour all of its financial obligations.

Group’s performance in FY19 and FY20 outlook

The Group’s revenue increased marginally by 0.8% to €16.6 in FY19. Mariner is principally involved in the handling of containers, where in FY19 this represented circa 70% of the total volume handled by its port. In the container industry volume is measured in TEUs, which reflect the number of twenty-foot equivalent units. The Group handled 302,080 TEUs in FY19, an increase of 3.3% over FY18 (292,206 TEUs). The rental income generated from the retail property in Latvia (circa €0.5m annually) is not material to the Group and only represents circa 3% of the Group’s total income.

Operating expenses were fairly stable in FY20, which resulted in EBITDA to also increase marginally by 0.7% to €8.6m. In view of this proportionate change during 2019, the Group’s EBITDA margin remained stable at 51.7%.

In view of the economic downturn caused by the COVID-19 pandemic, the Group anticipates that revenue will fall by circa 8.4% to €15.2m in FY20. The Group expects to mitigate net operating expenses in FY20 by €0.4m or 4.7%. In combination, these will negatively impact the Group’s EBITDA by €1m (FY19: €8.6m), consequently the EBITDA margin is expected to fall to 49.7%.

The Group’s leverage has increased during the last three years, with net debt increasing at a CAGR of 17.8% during this period. Conversely, during the last three years EBITDA experienced a negative CAGR of 4.7%, given that during the last two years the Group did not match the performance registered in FY17. The combined effect of these factors resulted in the Group’s gearing (net debt/EBITDA) to jump from 3.4x in FY17 to 5.2x in FY19.

Despite this, the Group’s coverage ratio remained healthy, with this standing at 4.0x in FY19. In view of the downturn caused by pandemic during 2020, the Group expects its coverage to fall to 3.4x this year, which we deem as healthy considering the current stressed economic environment. Based on this, together with our opinion that the Issuer has sufficient resources at its disposal to honour all of its financial obligations, including its bond interest payment obligations, we believe that Mariner can weather this storm.

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