Seafox supported the £20m raise years and years ago to save the company. Said company has turned aroundSaid shareholder cashed some chips in |
Something smells off to me.
It's not like they're distressed sellers, the shares are given away as dividends, yet if they believe in the future of the company, pay dividends in cash. Unless there is something we don't know whereby the company is forcing this situation to increase the free float. But there again seafox aren't obligated. Weird situation |
Once the new lender agreement is signed off. The board should consider share buybacks, which they will need lender approval for.
It will be highly accretive for the remaining holders, yielding a return of around 17% [from memory].
This is far greater than buying in new ships and has the advantage of being more bitesized ie you an buy in $5m shares/warrants, but cant buy a liftboat for that.
This is both a valuation issue, but will also help soak up the flow of shares coming back to the market, so a now and later benefit.
I mentioned this to the board, but they are conservative and therefore reluctant.
If you can see the logic and agree, email them as they are interested in shareholder views. |
Interestingly though I don't believe that of the 150 all of them will be distributed - at least not at this level. What I'm hearing is that thoughts of the overhang are a touch overdone - I'd think in the first place (i.e. at this level) only c20m are available, and it looks like some chunky trades done last couple of days will have made a good dent in that... |
 Anyone selling because of a middle east conflict lacks any critical analysis skills, or for that matter geographical knowledge. The only scenarios which could reduce the activity of the company would be a direct conflict between Iran and the states on the opposite side of the Gulf, Bahrain, UAE and Qatar. This just isn't going to happen.
So I favour warrant sellers and those with a fear of capital gains tax changes - who may even be making their CGT position worse by selling. Quite possible a Seafox holder needs some cash and is taking advantage of the newly available liquidity. I am surprised a sophisticated investor would be prepared to push the price down so much. However without talking to one or more actual sellers and finding out their reasoning it is impossible to tell.
I have given up caring really. The concern is if someone knows something and all we have had since the spring, when selling started, is good news after good news. All I can reiterate is the company will soon be in a position to buy back stock, in which case the low share price really helps investor returns. |
This must be seafox related, only distributed 30 mill of the 150 mill shares so far.
Despite all the good news here, the market doesn't want to know |
Surely that would send the oil price up (it isn't).. |
My guess the drop today would be fears of wider ME conflict but who knows. |
Topped up at 15.40. Is the weakness warrant holders cashing in or maybe fears of wider ME conflict? |
wigwammer - yes, I am sure you are right. There will also be those that won't buy anything that doesn't have a dividend. There is also something of a buyers strike and active selling into the autumn budget. That said this is pretty well publicised to the active private investor so we can't especially lay the blame at a lack of knowledge.
IMO there might also be people looking at the price of oil and drawing very much the wrong conclusion as to what this means for our business this time. The GCC states have all made it very clear, by ignoring any calls from OPEC+ to cut production to support the price, that they are going to keep producing their cost advantaged resources. All KSA has achieved by cutting its own volumes is to support US shale producers and other expensive basins. The sensible thing is to put oil into a steep backwardation cutting off funding to shale. |
Buyers and sellers make a market. There may be potential buyers who are not yet aware of the debt reduction and impact on interest costs, and/or who have not considered the through cycle improvement in earnings quality, and associated discount rate. New and substantial buyers - made aware of the complete story including the falling earnings risk - could quickly absorb any overhang. |
There are sellers ignoring fundamentals, and I wouldn't be surprised if they are fully aware of the development of the debt and interest burden. Fortunately the refinancing, triggering of the warrants, and ability to buy back shares are in the short term and so the company can get a measure of control over its own share price destiny. |
As stated previously, the lower debt has dramatically reduced the through cycle discount rate that should be applied to earnings. Even in the event of a slowdown, GMS is not likely to have to cover the same fixed cost interest burden given the lower debt. Not sure the market has fully grasped this yet. Onwards and upwards (eventually).. GLA |
I've just taken a position on GMS this morning.
They appear cheap at these levels.
I'm in this line of work and we are very busy.
Good prospects in this industry.
P |
Interest costs are coming down. The current rate is SOFR + 300bp. So we have been paying approx 8.5% and 50bps decline will be a 5.8% move to our advantage in interest rates. The Fed is signalling it will continue to drop headline rates with the dot plot forecasting 3.4% by the end of 2025, which would see our effective rate, assuming leverage ratio below 2, at 5.65%. This is lower than expectations so it would be unlikely that either the company or most investors would have that in centre line financial projections. Interest is a moving target, but annualised costs will be something like $11m rather than the very approximate $18m annualised yesterday. |
It is the killer. If no overhang it would be 20 plus....but who wants to stand in front of a steamroller. I've sold 70% of my holding. Real shame. |
Between seafox bucket (17p sellers) and 80m shares yet to be issued to warrant holders (at 6p),there is significant supply in the short term and it is going to be a while before it frees itself from that pressure.Suggest sleeping on it for a year |
Must be seafox distributing all those shares and some being sold off. |
Why can't this hold a rise.
Last 2 updates excellent, rises for a day or 2 then slumps back down. Infuriating |
In 2018 long term debt went up from $402mn to $410mn. The interest bill was $31.3mn. At the half year just gone the interest expense was $12.3mn, $24.6mn annualised, so not that much lower. Revenue has significantly increased whilst cost of sales is broadly similar. So rates, utilisation and effective operations are doing the job. We have 3 or more interest rate decreasing events this year (probably): a 25bps cut in September, the refinance, and the leverage ratio going below 2. It's not impossible the Fed does another 25bp cut. That's $5mn odd off the interest expense (I've not calculated exactly) though reducing every month / week! as the outstanding principal is repaid. The saving is also small beer compared with the cash being generated. |
The interest thing to look at is how the enterprise value of the company basically is unchanged over the past 3 years, from 3 years ago the shares were at 5p and the ev around 440m usd which is the same as today, basically all the debt pay down has converted into increased market cap, from this we can predict the shares should continue to increase by about 6p per year at an ever rising rate ... |
They're throwing off cash..
September 4th:
..net bank debt to US$ 238.5 million.. Subsequent to the period end, the Group made further prepayments towards the bank borrowings of US$ 11.0 million.
(i.e. net debt USD 227.5 million)
September 12th:
Our net debt today stands at USD 224 million. |
The repayment of debt has done two main things. 1) increased the proportion of the enterprise value owned by the shareholders rather than debt holders - hence the huge share price appreciation over the past 18 months... 2) materially reduced the discount rate applied to through cycle earnings. Even in the event of a downturn, GMS does not need to cover the same interest costs that it did before. From memory, it remained a cash generative business at the operating level even in the downturn - it was the scale of interest costs that killed it. It's a fair bet now that with one or two more highly cash generative years ahead, the debt will be largely gone, and any consequent downturn can be faced with confidence that the business will survive. That has big implications for the quality of the earnings stream going forward, and what investors should be willing to pay for it. GLA |
I have been adding regularly in the last few months actually, some with a 15 handle but in the 18s in June. This is as income, and capital from takeovers roll in. I am pretty convinced the selling has nothing to do with the company or its performance.
I did wonder if some people were looking at oil price direction, but that would be a pretty naive view of how the industry works. The gulf states, which still have the cheapest production, are just going to keep producing and will ignore the oil price because trying to manage the price doesn't work. All it does is provide finance for more expensive fields to come on line. US shale has to bring production on line constantly, for example, and that is funded by forward selling. Producers in general are always heavily net short, which is the purpose of the futures market after all.
Part of the thesis is that demand for our services will be resilient even when oil demand starts to permanently decline. China is probably going into a lower energy intensive phase, but Indian usage is increasing. We provide the most cost effective services, with modern vessels, in the cheapest producing area. This latest contract, at higher rates, demonstrates that.
I do wonder about the capital gains tax selling, but that must be an edge case. For example it only applies to UK private investors. I still think there will be short selling from outstanding warrants, and they know that their window of opportunity ends about 7 months earlier than they may have thought. There is also potentially short selling from some Seafox investors that do want some cash. That said I would have thought Seafox might be a source of borrow, but perhaps that is the other large holder. These things solves themselves over a relatively short window and if not the company can sensibly institute buy backs after the refi and once gearing goes below 2. |
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