Gulf Marine Services Share Discussion Threads

[cw6365] 10/9/2015 14:08

Looks like they're testing out GMS Scirocco

hxxp://www.marinetraffic.com/en/ais/details/ships/370951000/vessel:GMS%20SCIROCCO%205602/_:10de177e8fd93654150a36a8d7f05445

[mick] 04/9/2015 16:46

Nice to see a bit of interest developing in GMS. The interim results and statement were very solid and based on price earnings ratio it looks quite cheap.

[woodcutter] 27/8/2015 11:18

Dodge i don't disagree on perceptions i am both a user of TA charts and FA fundamentals and will usually give greater precedence to the TA when placing a trade. However the outlook statement pretty much defines where i think the value is medium term. i'm not unduly concerned on the $30m it's less than 5% of the total and some fluctuation is to be expected.

As i noted in my earlier post i think GMS could be significant beneficiaries of the major oil companies reducing capex and leasing more short/medium term where they can. And most importantly the operating cash flow is exceptional.

Indeed the outlook statement implies there's even greater opportunity to increase the fleet size. i hardly think they'd consider doing that if there wasn't the confidence that the additional contracts were available to fill the need.

There's no question there is real risk of a contract down turn and a triple whammy, high debt, big depreciation on idle fleet and loss of cash flow. But they're pretty clear to the contrary and if they're right and it falls out positive GMS looks half the price it should be on fundamentals.

Wasatch seem to think so too.

aimho

woody

[dodge meister] 26/8/2015 13:06

I am always concerned about perceptions, as fundamentals rarely define share prices (well not in the short term anyway). As the backlog is monetized, the backlog will reduce and in future results will look worse (its $30m down from last results). Any thought on areas (except debt which is a given) that could be perceived as negative going forward?

Just thought of another, increasing fleet size instead of large dividends. Growing too fast with large debts is always a concern.

On the flip side, the decommissioning in the North Sea is a £30Bn business according to the times on the weekend.

[tintin82] 26/8/2015 11:15

hxxp://gcaptain.com/middle-east-brings-solace-to-oil-services-companies/?utm_source=feedblitz&utm_medium=FeedBlitzEmail&utm_campaign=0&utm_content=261222#.Vd2RgPlVggs

Might be of interest folks

Demand from the region is “better than ever”

[woodcutter] 25/8/2015 10:53

a further reason why the gross margin reduced was the increase in depreciation and amortisation charges added to the COS as the new vessels come on line and are added to the assets on the balance sheet. this is odd as i'd have expected these to be in the admin costs

anyway i've read the results pretty throughly now and unless there's a major shift in the leasing of platforms i'm here for the long term, patience will be rewarded if the fleet utilisation continues at current levels.

it's being held back by the sector performance

time to look for some other bargains

woody

[woodcutter] 25/8/2015 10:32

loudenr the key ratio for cash flow is the comparison of operating cash flow to operating profits not the end cash figure at the bottom of the cash flow statement it's about how much cash you generate from operations

spend some time reviewing note 11 and you'll get a better appreciation of the business cash flow dynamics.

the other part of the cashflow statement is more to do with the balance sheet and capex verses borrowings. the capex is added to the balance sheet and depreciated over time similarly the borrowings are also added to the balance sheet.

debt to EBITDA of 3 isn't excessive unless they start to loose customers. then they're really in the sh*t as they'll have high debt, high depreciation on unutilised assets and poor cash flow, so BUST! but there's no evidence that is happening, quite the contrary.

and the interest payment are adequately covered nearly 4 times by profits

woody

[woodcutter] 25/8/2015 10:31

we have been in the midst of an oil price correction for over a year now and yet their operating cashflow for H1 this year is an improvement on last year. there's no signs of any significant downturn in their future revenue forecast indeed quite the opposite. i would have thought if there was a serious problem with earnings falling we would have seen some signs of it by now.

maybe i'm not reading the same report as some of you guys

woody

[loudenr] 25/8/2015 10:28

woody

Cash flow negative as cash at the end of the period is less than it was at the beginning. Appreciate what you say about the ratios but it is making me uncomfortable so I have trimmed back and will continue to hold. I will only feel comfortable buying more when I can see the debt being reduced.

The other thing to remember is that for revenue (unless they can get higher prices for their vessels) to grow more capex is needed to build more vessels. I see this as a capex intensive business on an ongoing basis.

Overall I think this has the potential to be a great company, this set of results just made me a little uncomfortable.

[woodcutter] 25/8/2015 10:22

you're concentrating too much on the value of the debt and not the ratios!

woody

[imranawan] 25/8/2015 10:19

Could well be loudenr. On balance I will continue to hold and will look to add on only weakness, as I think its a good company, and share price should appreciate over time. On a PER basis its cheap, albeit it carries a fair chunk of debt, but given the fall in the price of oil, this is been relatively resilient. As and when the oil price recovers, the share price should also follow suit.

[woodcutter] 25/8/2015 10:19

granted the debt has increased appreciably as they come to the peak of the capex programme but this will diminish going forward as they lease out the platforms and increase cash flow and profits. I also think in the current climate there'll be more emphasis on clients using GMS facilities rather than investing in their own capex programmes, indeed most oilers are dramatically scaling back capex.

i don't see how you get negative cashflow

from the cash flow statement note 11

pbt $36162
operating cash flow before movement in working capital $61024
cash generated from ops $48841

And that's just H1

that's an exceptional operating performance, if the movement in working capital had improved it would be even better.

the depreciation charge which was $11331 is masking the profit performance and this will increase as the capex is added to the balance sheet assets. what's more important is the net debt relative to cash flow or EBITDA.

the net debt is £374m with operating cashflow of around $50m in H1 so assume $100m for H2. perhaps a better way of considering it is net debt to EBITDA which is 374/120 rough 3.1. and more importantly it will lower considerably as the capex slows and cash generation improves.

if they can continue to keep the fleet occupied at the current level this looks massively undervalued on a cash generation basis.

woody

[loudenr] 25/8/2015 10:11

imranawan I completely agree with you that debt should be reduced before dividends increased as that would be a big catalyst for the share price in my opinion. I note that there is the mention of banking covenants in the report this time around which can only mean that they are aware of the high levels of debt.

I just wonder whether there may be another placing at some point to reduce the level of debt.

[imranawan] 25/8/2015 09:57

I bought in after the IPO, and added at the beginning of the year at sub 100. I agree with your comments loudenr that the debt is an issue, but the overall results are solid. They also reiterated that several times in the results that as capex is reduced they should be able to increase the dividends. My own preference would be for them to start to pay down some of the debt, rather than increase the divi. The overall debt to EBITDA position is 2.6 which is manageable.

[loudenr] 25/8/2015 09:39

As a holder I am a little disappointed with these results and they were not what I expected. The increase in the level of debt is worrying and the business has gone cash flow negative even after borrowing and additional $85m. Eventually the debt has to be repaid and is a massive weight on the profits for the foreseeable.

I still hold but have trimmed back this morning. Reducing the level of debt is key for me. I also note the chairman's comments that performance is broadly in line with expectations which to me means they are going to miss by a little bit.

Just my thoughts - happy to be challenged

[macarre] 25/8/2015 08:15

LONDON (Alliance News) - Gulf Marine Services PLC on Tuesday posted a solid set of results for the first half, with profit and revenue both higher and the group's fleet utilisation remaining strong, along with confidence that earnings will improve in the second half.

The company, which provides self-propelled self-elevating support vessels to the offshore energy sector, said its pretax profit for the six months to the end of June was USD36.1 million, up from USD34.3 million a year earlier, as revenue for the group increased to USD98.2 million from USD90.7 million.

Gulf Marine said its fleet utilisation in the half was 98%, with charter day rates in line with its guidance. The group said its fleet expansion programme is now more than half complete and is on time and on budget. The three new vessels it has commissioned most recently have been immediately deployed to new contracts.

The company added it would pay a flat interim dividend of 0.41 pence per share.

The group is anticipating a reduction in planned special projects in the second half of the year and, in addition to the new vessels which will be added to its fleet in the third quarter, expects an increase in total available days of more than 25% in the second half. More than 95% of its total available days for the second half have already been contracted, it said, and this should lead to a substantial rise in second half earnings.

"Given the group's continued success in winning contracts for the new vessels, we expect to see growth in our revenue earning capacity feeding through to the bottom line and dividend prospects in 2016 and thereafter," said Chief Executive Duncan Anderson.

"As the period of capital investment associated with the current new build programme concludes in 2016 and the group captures the earnings benefit from the enlarged fleet, the board will consider the appropriate dividend policy that balances the opportunities to invest to continue to grow the business with the potential for increased shareholder returns," Anderson added.

Gulf Marine shares were up 5.2% to 107.00 pence in early trade, one of the best performers in the FTSE All-Share.

Copyright 2015 Alliance News Limited. All Rights Reserved., source Alliance News

[trident5] 25/8/2015 08:05

Yes but I expect businesses to charge more at higher margins for special one off projects

[macarre] 25/8/2015 08:04

Agree. Not mind-blowing, but very solid results (as usual). Hugely under-valued as sector is out of favour with investors, despite GMS being well positioned to perform strongly even in an economic downturn.

[woodcutter] 25/8/2015 07:58

Mac i've been around 40% cash since spring last year so i can afford to be a little bold. the results are very good and i wished i'd bought more yesterday. btw it's a ftse small cap company.

what you have to take account of with GMS is the level of debt, the forward order book and the cash flow. assuming the order book remains strong then when the capex starts to diminish the cashflow will drive down the debt and we'll see the eps grow significantly. if you can build and be patient this will be a very rewarding share, and it's valuation is well below what it should be imv. they're basically telling you exactly that in these H1 results

the gross margin is reduced due to the number of special one off type projects that were undertaken in H1, that's clear in the report. the admin costs also came down, a further good sign costs are under control. the backlog should improve now the specials are gone too.

aimho

woody

[trident5] 25/8/2015 07:47

Curate's egg - what happened to gross profit margin? Backlog has fallen.

[tintin82] 25/8/2015 07:27

Agreed, really strong results. Yesterday's sell of certainly had me worried, but for no reason. Well done whoever snapped up more on the big drop.

[tudes100] 25/8/2015 07:22

Solid results imo, nothing to warrant the drop off we have seen in share price Remains significantly undervalued, strong hold for me.

[kissxx] 24/8/2015 22:08

This isn't an AIM share. It's main market. Still think he's brave though with results out tomorrow.

[macarre] 24/8/2015 21:03

You're brave woody. Not because of the quality of the company but more so due to buying an AIM share in this market. Hopefully a great trading statement tomorrow