Gulf Marine Services Share Discussion Threads

[catsick] 19/4/2024 06:58

Finally trading at book value!! Although book value will probably be 1-2p higher by now !

[dgwinterbottom] 14/4/2024 19:24

hpcg - many thanks for your thoughts, much appreciated.

[hpcg] 14/4/2024 12:08

I'd guess they'll announce a plan at the half year, based on provisos and financial metrics and bring it in if next FY is up to scratch. I would think a proviso might be to renegotiate terms on the loans. We might get more information in the forthcoming AGM notices which will probably come out at the end of this month. Last year's resolutions were all around the possibility of raising money. Whilst this one won't have a final dividend authorisation it could ask permission in some general terms for an interim, special dividend or share buy back. I'm honestly not expecting that, as continuing de-gearing and turning that into better financial terms is more important for shareholder value, but they are not out of the question.

[dgwinterbottom] 13/4/2024 15:33

Any thoughts as to when a dividend might start to be paid?

[hpcg] 13/4/2024 08:43

Super strong all day Friday. There was 450000 shares on the offer that was gradually chewed through with the seller not accepting any less, perhaps near the close. It will be a slow rise for now though apart from when contract news drops. Perky inflation in the US is helpful too, with these hard dollar earning assets being so expensive to replicate. Sterling is likely to be weak versus USD. It is all positive.

[bmw30csl] 12/4/2024 11:18

Drop through margins on rate increases will be juicy. The operational gearing here will be huge.

[hpcg] 12/4/2024 09:12

runster - the continuing story is the turnover of contract terms from low rates to higher rates. In other words this line from the statement:

Average day rates across the fleet increased by 10% to US$ 30.3k compared to the previous year's US$ 27.5k with improvements across all vessel classes, particularly for E-Class whereby, the day rates improved by 17% to US$ 41.4k (2022: US$ 35.4k). K-Class and S-Class rates increased by 7% and 5%, respectively.

This is a multi-year and ongoing process as units on older and lower rate contracts complete their existing contract and enter into new ones with step change higher rates. This situation, in my experience of booms and bust in the oil services industry end in 2 ways. Firstly a conventional oil price crisis where E&Ps pull in spending. Contracted hardware is a late cycle story as old rates run on and the new lower rate regime merges in. Usually come the end of an oil up-cycle contract terms are relatively long as there is competition to secure vessels, and terms are better for longer periods.
The second way asset contract prices crash is after a "new paradigm in oil" and external money floods in. This has often been Norwegian asset owners using German bank funding, but the last time this happened, in 2006, Dubai money also contributed. Drilling ships, seismic vessels and support vessels have only just stopped paying the price for that excess. Right now this seems very unlikely but I keep my eye out.

[wigwammer] 12/4/2024 07:44

Fair point, runster. I suspect it could double again over the next 18-24 months, but not the same exciting upside that existed at sub 5p. Well done to those who called it at that level, they are few and far between. ATB :)

[hpcg] 10/4/2024 11:30

23p paid. Very happy to have ultimately increased my number of shares held as part of my capital gains tax management strategy. Also taking the view that a high probability 50% gain to the end of the year was going to be better than some discounted REIT and infrastructure plays would return.

Equally happy not to have taken money off the table at 12p, 15p, 16p or whatever where some were tempted to de-risk. I've made the mistake of taking profits far too early, notably Fever Tree where I turned a potential 10 bagger into an 80% gain. Not that I had any significant money there anyway, another mistake. These opportunities only present rarely and they have to be pushed to drive a portfolio forward.

[runster] 08/4/2024 09:40

Almost at max utilisation, though, so not a meteoric rise ahead.

[wigwammer] 04/4/2024 11:36

Great results, and still trading at a discount to book value. Equity per share now 24.4p from 21.9p. We can anticipate this continuing to rise as net debt is repaid, and possibly as assets are further revalued to reflect the positive anticipated economics supporting them. Onwards and upwards..

[hpcg] 04/4/2024 10:06

A lot of the highlights are highlighted, so everyone will have seen already. A few more buried nuggets I found of interest, with my comments in braces:

* Recently approved by the Board, our residual dividend policy seeks to strike a balance between investing in the business and providing returns to shareholders.
{They alluded to dividends in the last RNS. I am not a big fan, but they are required to attract a certain type of investor, and income funds.}

* The Group is in the process of refinancing its term facility in advance of the bullet payment becoming due in June 2025. Management's ongoing discussions with various lending entities are aimed at securing terms that align with our long-term strategic objectives, ensuring continued financial stability. We are optimistic about the outcome of these negotiations and will keep shareholders updated as we navigate this pivotal phase in our financial planning. The Board expresses confidence in our ability to secure favourable terms that will contribute to the sustained success and growth.
{We should be able to get a reduced interest rate margin from current 310 bps IMO}

* The Group improved its Lost Time Injury Rate (LTIR) going from 0.1 in 2022 to zero in 2023. However, two medical treatment cases were recorded taking the Total Recordable Injury Rate (TRIR) from 0.1 in 2022 to 0.18 in 2023. These levels continue to be below industry average.
{Good safety goes hand in hand with good operations, and 0 is the only acceptable number of LTIs - the treatment trend needs reversing. Safety can get compromised under tight financial conditions, a false economy. Glad to see that is not the case.}

* Average day rates across the fleet increased by 10% to US$ 30.3k compared to the previous year's US$ 27.5k with improvements across all vessel classes, particularly for E-Class whereby, the day rates improved by 17% to US$ 41.4k (2022: US$ 35.4k). K-Class and S-Class rates increased by 7% and 5%, respectively.
{There is below a table of revenue and operating profit per class. S-class, thankfully the smallest segment, saw profit decline marginally as rate increases did not keep up with inflation. Note that part of the thesis here is that debts are inflated away; inflation so long as rates keep up and margins are maintained enhance absolute cash available for debt repayment.}

* Reported general and administrative expenses amounted to
US$14.6 million, up from US$13.2 million in 2022, driven by increased staff costs and professional fees.
{Basically 10% inflation, but they say there are fees around reporting commitments to lenders, and we can expect come of those to drop out, see below.}

* Key benefits of being below 4:1 times is it allows GMS to meet its covenants, to pay dividends and to cut some debt monitoring fees.

* The Group's capital expenditure relating to drydocking and improvements of the vessels increased to US$ 11.3 million, 2022: US$ 9.1 million.
{Money is still being spent on maintaining the assets.}

* Net bank debt reduced to US$ 267.3 million (2022: US$ 315.8 million). This was a result of management's commitment to accelerate deleveraging. The Group repaid US$ 56.2 million (2022: US$ 51.4 million) towards its term loan, of which, US$ 26.2 million (2022: US$ 3.8 million) were over and above its contractual obligation for 2023. A total of US$ 33.7 million (2022: US$ 3.8 million) was prepaid during 2023.
{$56mn taken off debt whilst also paying $31mn in interest. That collectively is funds available to shareholders in a debt free world, minus taxes. £67mn at 1.3 exchange rate. Should be higher in 2024 as rates have firmed.}

[hpcg] 04/4/2024 09:18

Yes, good, a large enterprise value is what we want! Thanks for the broker update thebd11. My year end target price range remains 28-32p post the most recent contract RNS. Top end requires more of the same story with regards to incrementing contract rates through the year, as of course people will be buying 2025 and beyond, not 2024.

[jqb1] 04/4/2024 09:13

Happy to hold, upgrades on the way

[bubloo] 04/4/2024 08:02

LOOKS GOOD BUT ENTERPRISE VALUE IS STILL HIGH WITH LARGE DEBT. SOLD 755
% BUT MAY COME BACK LATER

[xamf] 04/4/2024 07:28

Fabulous results with significant debt reduction and increased revenue and profits. Can't see an eps figure.

[thebd11] 04/4/2024 07:27

Good set of results. Panmure (house) nudge TP up from 23p to 28p. "We now expect EBITDA of US$96m in 2024, up from US$92.4m and with lower net debt expectations as deleveraging continues leading to lower interest expense, we now forecast Adj. PBT of US$46m in 2024, up from US$39.8m."

[catsick] 04/4/2024 07:25

Excellent results and an excellent outlook for 2024 , Refinancing underway at what should be lower costs for longer term which will allow nice juicy dividends which are being highlighted...the business could probably cope with 20-30m usd of dividends while still paying down debt quickly..

[hpcg] 01/4/2024 14:13

I've certainly assumed all the warrants will be issued. Surely the banks can just sell them on? Why would they take them if they have no value. Also it is clearly pretty old and out of date, not least with respect to the latest rates RNS. It was still as useful read.

[baddeal] 31/3/2024 23:39

Interesting read but I don't follow logic on the warrants.

[richtea2517] 31/3/2024 16:51

Good articleBullish for sure

[xxx] 27/3/2024 06:55

The recovery yeasterday may relate to the announcement of a bid for a fellow quoted OSV company quoted in Australia and operating in Asia [MRM]
It received a cash bid from private equity at a claimed x7.7 current year EBITDA.[ using H1 earnings x2]

Though they have some govt work and subsea ops which look better quality, the vessels are less specialised. Applying that same multiple to us and using the midpoint guidance of $91m for 2024 gives an EV of $700.7m for GMS.

Not only is that a long way from here, but it is interesting to note that MMA shares jumped to a premium ie the bid is unlikely to be acceptedat this price. In addition the bidders plan to keep all the staff ie it is a bet on the sector, not synergies or cost cutting...

[richtea2517] 19/3/2024 15:51

AhNormal service resumed

[premium beeks] 18/3/2024 15:16

Nice pullback, will it test 19 again or bounce off 20?In the grand scheme of things if its re-rating and going to 40/50p then it's not even a question that needs answering