Yesterday’s Q3 Trading Update from Gulf Marine Services (LON:GMS) showed continuing growth in turnover and profitability.
Following on from recent contract wins the group, which is a leading provider of advanced self-propelled, self-elevating support vessels serving the offshore oil, gas and renewables industries, has inspired broking analysts to increase their Price Objectives for the group’s shares.
The Business
The business was established in Abu Dhabi in 1977 and has subsequently become a world-leading provider of advanced self-propelled self-elevating support vessels (SESVs).
The group’s fleet serves the offshore energy industries from its offices in the United Arab Emirates, Saudi Arabia, and Qatar.
Its fleet of 13 SESVs is amongst the youngest in the industry.
The vessels support group clients in a broad range of offshore platform refurbishment and maintenance activities, well intervention work, and offshore wind turbine maintenance work, as well as offshore platform installation and decommissioning and offshore wind turbine installation.
They are four-legged and are self-propelled, which means they do not require tugs or similar support vessels for moves between locations in the field; this makes them significantly more cost-effective and time-efficient than conventional offshore support vessels without self-propulsion.
The vessels have a large deck space, crane capacity, and accommodation facilities (for up to 300 people) that can be adapted to the requirements of the group's clients.
The company’s assets are capable of serving clients' requirements across the globe, including those in the Middle East, South East Asia, West Africa, North America, the Gulf of Mexico, and Europe.
Trading Update And Guidance
For the nine months to end-September, the group indicated that revenues were up 11% at $126.1m ($113.3m), while its adjusted EBITDA was 12% better at $76.1m ($67.7m).
The group, which carries a large debt position against its vessel costs, has actually reduced by 21% its net debt level to $221m ($281m).
The company reported a 2% lower utilisation of its vessels during the period, at 92% against 94% previously.
However, it also stated that average daily rates were up 8% at $32.8k ($30.3k).
CFO Alex Aclimandos stated that:
"I am delighted to see the results achieved as well as the plans moving forward adding value to the shareholders of the Company.
The solid fundamentals of the business are confirmed day after day and so is our ability to transition GMS into an agile Company serving offshore activities for Oil and Gas as well as windfarms customers worldwide."
The group indicated that its adjusted EBITDA guidance for 2024 has been increased to be in the range of $96-101m.
Analyst’s Views
Analysts Andy Smith and Ashley Kelly, at Panmure Liberum, increased their Price Objective for the group’s shares to 30p (26p), rating them as a Buy.
They estimate that the current year to end-December will see sales of $166.0m ($152.0m), with EBITDA of $98.6m ($87.5m), helping to lift pre-tax profits to $36.5m ($12.1m), raising earnings to $0.03 ($0.01) per share.
For the coming year, they go for $175.0m sales, $103.8m EBITDA, and $54.2m profits and earnings of $0.04.
Daniel Slater at Zeus Capital is putting out a 29p per share valuation.
His estimates for this year are $167.2m sales and $98.4m EBITDA, with adjusted pre-tax profits of $42.4m, generating earnings of 3.2c per share.
For next year he sees $174.7m sales, $102.3m EBITDA, $53.2m profits and earnings of 4.1c per share.
In My View
This group is moving very well currently, with some major operating growth to become visible over the next few years as it expands its vessel fleet, possibly more than doubling its size in due course.
In late April this year, the group’s shares were up to a 24.60p High; now, at just 18.90p, they are a ‘growth stock’ bargain and could well see a 50% improvement within months.
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