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Recent discussions among investors regarding Gulf Marine Services Plc (GMS) have highlighted a generally optimistic sentiment about the company’s trajectory, particularly in the context of debt reduction and backlog growth. Notable developments include an increase in the revenue backlog by $75 million, signifying strong contractual commitments, and the anticipation of a positive trading update set to release within the next few weeks. The investors expressed excitement over the company's robust EBITDA margin exceeding 60%, further accentuating the positive outlook for cash flow and potential dividends. As one investor aptly noted, “Consistent debt reduction, backlog growth, good communications and a company with a plan and executing it. Lots to like.”
Insights from the discussions also revealed that investors are keenly awaiting the upcoming final year results, with expectations of continued strong performance and a solid narrative around GMS’s strategic positioning in the decommissioning segment of the Gulf. This sector is poised for growth, with potential demand driven by international agreements mandating the decommissioning of aging rigs by 2030. As highlighted in the discussions, “This is one of the safest places to park their money,” suggesting that investors view GMS as a solid investment choice amidst market volatility and competition. Overall, the dialogue indicates a strong belief in GMS's capacity to deliver enhanced shareholder value through strategic growth and disciplined financial management.
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Gulf Marine Services Plc (GMS) has recently experienced a significant boost in its stock value following the announcement of contract extensions for two of its vessels with a major National Oil Company in the Middle East. These contracts, which have been extended for three years at enhanced rates, are a testament to GMS's strong relationships within the region and its commitment to supporting offshore energy operations. As a result of these developments, the company's backlog has now reached an impressive $558 million.
Mansour Al Alami, GMS's Executive Chairman, highlighted that the extensions not only underline the robust demand for their vessels but also indicate the high utilization rates across their fleet. This positive momentum in securing contracts positions Gulf Marine Services favorably as it navigates the evolving landscape of the offshore energy sector, reinforcing investor confidence in its operational capabilities and future growth.
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I would caution just a touch regarding the debt payoff. I think a level of maintaining 1-1.5x is suitable, as this would allow any or all of: dividends, buybacks, accretive acquisitions, investment in the fleet / new SESvs etc etc, whilst keeping debt repayments manageable. I just think that to be prudent we shouldn't expect there to be 0x debt. Also think that having that extra money (at 1 or 1.5x that's something over $100m) to 'play with' is a valuable thing |
With the present order book then in 3 years all of the debt would have been paid off and the EV would be a little over $200m assuming full warrant conversion. Let that sink in $100m Editda v $200m market cap. Bonkers. |
Great posts indeed - thank you guys! |
Yes thank you guys |
Thankyou all for such detailed informative posts, really helpful. |
I suppose it all depends on what the warrant holders do with the shares once they are exercised. I believe BoA is one of the holders, who have indicated that they see much higher value in them than at the current 15-16p level, in which case they just sit tight on them. Or (which I believe is currently happening) they are used to pay back the shorts that are in the market at the minute, so effectively the negative weight on the price is NOW, not THEN. (I.e. sell shares at 15-17pp currently, knowing you can 'buy' them back at 5.75p through warrants, bank the difference). So there 1) may not be 83m shares for sale (in fact I'm confident of this - it will be FAR lower than this), 2) they won't all be up for sale immediately and 3) the price action may / does already reflect this as it's public information. It's not ideal, but we get a chance to top up at 15p on a technical overhang which will last 1 MAYBE 2 years, whilst the company makes a lot of progress. I for one will sign up to that on a five year view every day of the week. And in fact we did, topping up in size in Sept at 16p. |
Alex informed me that no new warrants have been exercised since 30th June, so the situation is still "53.4 million warrants potentially giving right to 83 million shares remain to be exercised up to June 30, 2025" |
BD, Valued insight, please keep us updated as and when you hear anything. |
HPCG, a very good and informative post. Just to add, I had a brief email exchange with CFO Alex yesterday who confirmed the following points: The warrants don't expire on refinancing - this was a point I particularly sought to clarify. Alex said that in "2023, we were having advanced discussions around refinancing with lenders that would have led to the warrants being returned to us. With the improvement in share price impacting valuation of warrants and with some other commercial considerations, we were not able to reach an agreement. The new deal doesn't cover the warrants". I had asked whether the refi announced in an RNS on 1st August this year would constitute a scenario where the warrants were no longer valid, but that's not the case. Additionally, Alex informed me that no new warrants have been exercised since 30th June, so the situation is still "53.4 million warrants potentially giving right to 83 million shares remain to be exercised up to June 30, 2025". This is as per RNS from 28th October this year. In terms of debt, from the 1st August RNS, the company has refinanced to bank debt which "will have a tenor of five years from the facility agreement date. 80% of the term loan will be amortized quarterly over 5 years with a 20% balloon" and that they "expect the transaction to close before December 31st, 2024." So, very soon hopefully on that! 2025 updated guidance should be issued this side of Xmas I believe. I would be surprised if there was 2026 guidance, just because the board would probably like the flexibility to decide next Summer what to do with the excess cash in terms of dividends / buybacks / reinvestment, so issuing 26 guidance might bind their hands somewhat on this. |
I see greenwood has just released a new note with a price target of 29p which is considerable upside. |
Well there ought to be another short term 100% run because this should be trading at NAV given the returns this is making on NAV. These are the catalysts: |
Agree, no reason to sell this. Syria isnt an issue for GMS. Any buyer at 18+ needs faith and to think long term. The debt reduction and should really have an impact on the share price hopefully the long term debt ratio can stay low and look more attractive to future buyers. Have to think long term and not get caught up in wishing for another 100% short term run like we have seen in the past with this. Also think there could be some selling to free up funds for xmas? Thats what im hoping anyway lol. Again the day will come. Dont sell, INVESTEVERYTHING. |
No one knows why the share price is weak, only the sellers. If you look hard for a geopolitical reason you won't find one. If you look at the backlog you won't find a reason. If you look at financial data you won't find a reason. There is a rational reason for one seller, which is warrant owners. Buyers being put off need to have more faith in their own process. |
Any views on the current weakness? Possibly the action in Syria spooking PIs? GMS operates in the Persian Gulf so unless Iran and Saudi fall out I can’t see them being disrupted. Anyone have a more informed view on this? |
It will have its day. Bit of patience. I re bought today. It's cheap at this level I think |
Totally agree, never known a stock so consistently release positive after positive news and the downward trend continues. |
What a frustrating stock this has become! |
12th September: |
>>Broker confirms there has been no downgrade at all. It was always 2.9c.>> |
Yes, I guesstimated the newly announced contract would total approx $23m. Given the 54 day drain on the backlog and the net -$2m off that backlog. |
zho3 Dec '24 - 09:17 - 2638 of 2645 |
If they are turning over approx $14 million a month then between you would have expected the backlog to drop by nearly $28 million as the existing contracts are serviced. |
There were 54 days between October 10th and December 3rd. |
would it not just be this current contract is smaller than one that say has just been completed and so the backlog has gone down for that reason? Doesn't seem like an issue to me. |
Type | Ordinary Share |
Share ISIN | GB00BJVWTM27 |
Sector | Ship Building And Repairing |
Bid Price | 18.30 |
Offer Price | 18.45 |
Open | 18.00 |
Shares Traded | 3,117,519 |
Last Trade | 16:35:20 |
Low - High | 17.95 - 18.70 |
Turnover | 151.6M |
Profit | 41.34M |
EPS - Basic | 0.0386 |
PE Ratio | 4.74 |
Market Cap | 190.45M |
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