Gulf Marine Services (LON:GMS) – Zeus Capital value at 29p a share, now just 16.90p
From its offices in the United Arab Emirates, Saudi Arabia, and Qatar, this company operates as a world-leading provider of advanced self-propelled, self-elevating support vessels.
Its fleet of some 13 SESV’s support its 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.
The vessels 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.
They 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 fleet is 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.
New Contracts
Last Thursday the group announced that it had been awarded a new long-term contract in Europe and the extension of two existing contracts in the Middle East, adding a total of twenty-five months to the backlog, inclusive of optional extensions.
The company’s current backlog totals $505m, which more than triples the whole group’s 2023 turnover.
It is also some 18% higher than that announced at the half-year to the end of June.
Importantly, this strength of market demand is allowing the business to meet its deleveraging goal quicker than anticipated.
Management Comment
Executive Chairman Mansour Al Alami stated that:
"We are delighted to have been awarded this long-term contract to strengthen our footprint in the European offshore wind sector, marking a pivotal moment for GMS.
This contract not only underscores the strong demand for our versatile fleet but also reaffirms GMS's vital role in driving forward Europe's transition to clean energy through offshore wind development.
We are also happy with the extensions obtained on two vessels as it confirms the strength of the demand in the market.
Market fundamentals are steadily improving, allowing us to meet our deleveraging goals faster than expected.
As of the end of September, our net debt has decreased to USD 221 million, down from USD 267 million at the start of the year and USD 238.5 million at the end of June.
Our ability to deliver innovative and cost-effective solutions is a testament to the strength of our operational excellence and the trust our clients place in us.
As we look to the future, GMS remains fully committed to supporting Europe's renewable energy goals while continuing to enhance our performance and deliver sustainable value for all stakeholders."
Previously Major Shareholder Reduces Stake
By the way, it is well worth noting that Seafox International has been quite swiftly reducing its stake in the group, by way of distributing 150m GMS shares to its own shareholders through a ‘dividend in specie’.
In 2020 Seafox, which has a similar operation in the global offshore jack-up sector, wanted to take over GMS and merge the two operations – but it was not to be and has subsequently been a useful holder of GMS equity.
It is now up to the fifth reduction, without them being sales of shares – it is now down to 12.91% of the GMS equity, in which it was previously the largest shareholder with a 29.15% stake.
Its aim is to reduce this position down to just 103.7m shares (9.69% of the GMS equity).
Brokers View
Analyst Daniel Slater, at Zeus Capital, states that his firm has a positive outlook for the group’s shares and values them at 29p each.
He currently has estimates out for the group to lift its sales in the year to the end of December from $151.6m to $167.2m, while almost doubling adjusted pre-tax profits to $42.4m ($24.2m), with earnings of 3.2c (1.9c) per share.
For the coming year, he goes for $174.7m in revenues, $53.2m profits, and 4.1c per share in earnings.
My View
Considering that Zeus Capital reckon that the GMS shares are worth 29p, to me they look well worth another run upwards from their current 16.90p pricing, which values the whole group at only £180.82m.
I see them gradually climbing back up again to the peak they achieved of 24.60p in late April this year.
Hold very tight, while new investors now have an excellent buying opportunity.
(Profile 30.11.23 @ 13p set a Target Price of 16p*)
(Profile 22.01.24 @ 15.95p set a Target Price of 19.50p*)
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