Mercator CAPEX jumped on 108% in 2015 while Revenue dropped on 10.6%

29-05-2015 • About Mercator ($MERCATOR) • By InTwits

Mercator reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Mercator is a company in decline: FY2015 revenue growth was -10.6%, 5 years revenue CAGR was -3.3%
Mercator has high CAPEX intensity: 5 year average CAPEX/Revenue was 19.1%. At the same time it's a lot of higher than industry average of 8.9%.
CAPEX is quite volatile: 8,172 in FY2015, 3,937 in FY2014, 745 in FY2013, 2,745 in FY2012, 13,710 in FY2011
The company has potentially unprofitable business model: ROIC is at 0.9%
It operates with high leverage: Net Debt/EBITDA is 6.9x while industry average is 2.1x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Mercator ($MERCATOR) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	28,289	36,999	37,334	34,578	30,916	-10.6%
EBITDA	6,444	5,834	5,061	6,431	5,277	-18.0%
Net Income	940	206	-3,721	322	-4,495	-1,497.0%
Balance Sheet
Cash	892	2,211	3,149	1,585	2,531	59.6%
Short Term Debt	8,815	3,442	4,550	6,053	13,794	127.9%
Long Term Debt	23,919	27,426	25,848	25,639	25,067	-2.2%
Cash flow
Capex	13,710	2,745	745	3,937	8,172	107.6%
Ratios
Revenue growth	-22.6%	30.8%	0.9%	-7.4%	-10.6%
EBITDA growth	-1.9%	-9.5%	-13.2%	27.1%	-18.0%
EBITDA Margin	22.8%	15.8%	13.6%	18.6%	17.1%	-1.5%
Net Income Margin	3.3%	0.6%	-10.0%	0.9%	-14.5%	-15.5%
CAPEX, % of revenue	48.5%	7.4%	2.0%	11.4%	26.4%	15.0%
ROIC	5.5%	3.4%	1.0%	3.5%	0.9%	-2.6%
ROE	4.2%	0.9%	-15.8%	1.4%	-20.8%	-22.2%
Net Debt/EBITDA	4.9x	4.9x	5.4x	4.7x	6.9x	2.2x

Revenue and profitability

Mercator's Revenue dropped on 10.6% in FY2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased slightly on 1.5 pp from 18.6% to 17.1% in FY2015.

Net Income marign dropped on 15.5 pp from 0.93% to -14.5% in FY2015.

Capital expenditures (CAPEX) and working capital investments

Mercator's CAPEX/Revenue was 26.4% in FY2015. Mercator showed fast CAPEX/Revenue growth of 19.0 pp from 7.4% in FY2012 to 26.4% in FY2015. Average CAPEX/Revenue for the last three years was 13.3%.Battling declining revenue Mercator made large investments to CAPEX (155% of EBITDA) but that didn't help at least in this year.

Return on investment

The company operates at low but positive ROIC (0.88%) and negative ROE (-20.80%). ROIC decreased on 2.6 pp from 3.5% to 0.88% in FY2015. ROE dropped on 22.2 pp from 1.4% to -20.8% in FY2015.

Leverage (Debt)

Debt level is 6.9x Net Debt / EBITDA and 7.4x Debt / EBITDA. Net Debt / EBITDA jumped on 2.2x from 4.7x to 6.9x in FY2015. Debt jumped on 22.6% in FY2015 while cash surged on 59.6% in FY2015.

Appendix 1: Peers in Diversified

Below you can find Mercator benchmarking vs. other companies in Diversified industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
3M India ($3MINDIA)		17.9%	12.0%	8.5%	7.7%
Aditya Birla Nuvo ($ABIRLANUVO)		21.3%	16.7%	1.6%	2.4%
Dcm Shriram ($DCMSHRIRAM)		21.2%	10.2%	11.6%	-9.0%
Median (3 companies)		21.2%	12.0%	8.5%	2.4%
Mercator ($MERCATOR)		30.8%	0.9%	-7.4%	-10.6%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Aditya Birla Nuvo ($ABIRLANUVO)	17.0%	13.5%	14.9%	17.7%	20.4%
3M India ($3MINDIA)	13.1%	8.7%	7.3%	7.2%	11.1%
Raja Bahadur International ($RAJABAH)					9.0%
Dcm Shriram ($DCMSHRIRAM)	5.2%	6.9%	10.0%	8.4%	7.3%
Median (4 companies)	13.1%	8.7%	10.0%	8.4%	10.0%
Mercator ($MERCATOR)	22.8%	15.8%	13.6%	18.6%	17.1%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Aditya Birla Nuvo ($ABIRLANUVO)	16.0%	7.6%	6.5%	17.1%	7.2%
Dcm Shriram ($DCMSHRIRAM)	2.2%	1.3%	1.4%	1.5%	1.9%
3M India ($3MINDIA)	0.0%	0.0%	0.0%	0.0%	0.0%
Median (3 companies)	2.2%	1.3%	1.4%	1.5%	1.9%
Mercator ($MERCATOR)	48.5%	7.4%	2.0%	11.4%	26.4%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
3M India ($3MINDIA)		15.5%	10.4%	8.9%	18.1%
Dcm Shriram ($DCMSHRIRAM)	1.8%	5.9%	12.3%	12.1%	10.3%
Aditya Birla Nuvo ($ABIRLANUVO)	14.1%	10.3%	10.8%	10.3%	10.3%
Advanced Micronic Devices ($ADVNCMIC)	9.2%	9.1%	-2.8%
Raja Bahadur International ($RAJABAH)
Median (5 companies)	9.2%	10.3%	10.6%	10.3%	10.3%
Mercator ($MERCATOR)	5.5%	3.4%	1.0%	3.5%	0.9%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Aditya Birla Nuvo ($ABIRLANUVO)	2.8x	3.3x	4.0x	3.9x	4.6x
Dcm Shriram ($DCMSHRIRAM)	7.5x	4.7x	2.6x	1.7x	1.6x
Raja Bahadur International ($RAJABAH)					0.0x
3M India ($3MINDIA)	-0.2x	0.2x	1.0x	0.5x	-0.5x
Median (4 companies)	2.7x	3.3x	2.6x	1.1x	0.8x
Mercator ($MERCATOR)	4.9x	4.9x	5.4x	4.7x	6.9x

Mercator stock price chart

Mercator financials

mln.	FY2010	FY2011	FY2012

Revenue	36,537	28,289	36,999
EBITDA	6,566	6,444	5,834
Net income	532.4	940.0	205.6
CAPEX	1,930	13,710	2,745
Debt	39,675	32,734	30,869
Cash	4,729	891.8	2,211

About Mercator

Mercator Limited, together with its subsidiaries, is engaged in coal, shipping, dredging, and oil and gas businesses in India, Singapore, and Indonesia. It operates through Shipping; Offshore; and Coal Mining, Trading and Logistics segments. The company is involved in coal mining, procurement, and logistics activities. It holds licenses for three coal blocks in Petangis and Batuah, Indonesia; and a mining license in Mozambique, as well as exports coal. The company also explores for petroleum in two blocks covering an area of 180.22 square kilometers located in the Cambay Basin, Gujarat in India; and owns a mobile offshore production and a floating storage offloading unit. In addition, it has a fleet of tankers consisting of very large crude carriers, and aframax and product tankers to transport wet bulk cargo; and dry bulk carrier fleet of geared and gearless panamaxes, and kamsarmaxes. The company has 6 own tankers and a gas carrier of 626,791 DWT; and 14 own bulk carriers with an aggregate capacity of 1,061,488 DWT, as well as 1 chartered-in bulk carrier of 91,800 DWT with an aggregate capacity of 1,532,288 DWT. Further, it owns five trailer suction hopper dredgers having an aggregate capacity of 26,100 cubic meters and one cutter suction dredger for carrying out capital and maintenance dredging projects. Mercator Limited was incorporated in 1983 and is based in Mumbai, India.