I bet you are. Facts, GMS has been one of Paul Scott’s favourite stocks all year and each time he’s been talking it up and not once has he given it less than the top rating of ‘Green’ on Socko. He ramps the shares he owns, Plexus Holdings is another disaster of his and people still worship him don’t they |
Not at all, give me the facts. Price went down is that your fact? |
Clearly a member of the PS fan club. Facts speak for themselves |
Grow up you baby |
Another one of Paul Scott’s disastrous stock ramps |
I agree they are unlikely to become debt free as a level of gearing is appropriate, but for illustration's sake they could pay off the debt and run at 35%+ FCF yield with a PE of 4 (taking into account depreciation / replacement assets). Crazy cheap. |
I doubt the net debt will get near to 0 either - but that’s not the point.
The equity currently appears cheap (discounting 3 years future) even without the BoD seeking to optimise use of available resources (buybacks would seem a smart move at this price but check-back when there’s money available to allocate to them).
The market is currently (if you choose to exclude transient technical factors) pricing-in some combination of market downturn / BoD screw-up.
Neither is showing on the horizon.
elsa787811 Dec '24 - 17:04 - 2665 of 2673
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.
thebd1111 Dec '24 - 17:08 - 2666 of 2673
I would caution just a touch regarding the debt payoff. |
I would caution just a touch regarding the debt payoff. I think a level of maintaining 1-1.5x is suitable…
I completely agree but nonetheless my calculation show the underlying potential of the business assuming they did not instigate any redistribution to shareholders.
They seem keener on a dividend than a buy back which is a shame.
In terms of the market we are all in the dark, though the diversification into the wind market can only be a positive. |
 The fundamentals and valuation look excellent, but my one nagging concern is the cyclical nature of the oil business. I don't really know where we are in the cycle or if smart money is expecting a significant downturn in investment. There is no obvious sign of that and indeed GMS cites 'strong demand across all our vessels', but whenever I'm buying something that looks 50% undervalued I start to wonder what I'm missing! I've done a lot of work on the accounts and looked back at valuations in 2014-15 when the market was last buoyant and I can't see any reason that these don't/won't trade at 25-30p once technical factors are cleared and on continued robust news-flow, noting that we have refinancing, continued deleveraging and commercial updates likely to drop soon. My view is that on an asset valuation basis this NAV will rise from 25p today to 34p by the time the debt is fully repaid in 3.5 years because the free cash generation and debt repayment potential exceeds the depreciation cost significantly. On an earnings basis it traded at an average of 6.6x npat through 2014/15, which would put it at 22p based on FY25 forecasts. However the fundamentals and management look better today. Also worth noting that they traded around NAV during that period which would be 25p today and rising. Finally, they paid a 1%-1.5% divi back then, whereas the recently forward looking distribution policy outlined in August suggests that 20-30% of adjusted profit will be paid going forward, which would give a 5% divi with plenty of scope for increases (Greenwood think this will commence in 2026, but why wouldn't they start in 2025?). |
So theoretically BOA could aggressive short the pants of this, knowing when their warrants are exercised they can repay them having bought at 6p.
So I guess it would be useful to know who is involved re the warrants, and why there are none short over 0.5 |
Indeed the above link - but that doesn't track below 0.5% - such that you could have 5m shares shorted and it wouldn't be there. Not saying that means there ARE shorts out there. But it would be fiscally negligent NOT to short here as a warrant holder, I would argue, given there is no downside if the price rises, so you are locked into a gain instantly. |
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!
Is there data on the current short positioning in this? |
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.
Also remember that the warrants will raise around $6m - which MIGHT be going straight into paying off the debt - so it's not alllll bad.
Worth flagging that all the TPs (mostly around the 29p from memory) out there are fully diluted, so takes all the above into account already. |
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"
Excuse my ignorance but won't this lead to significantl downward pressure when they are exercised at some point over the next 6 months? |
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.
I remain confident that GMS will blow is top sooner rather than later.
Just a matter of time.
Comfortable to hold as I suspect buyers will miss the boat if they don't buy soon.
P. |
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:
* Closing of the refinancing.
* Guidance on 2025 and possibly 2026
* FY 2024 trading update
* FY results
* share holder returns begin
These should be roughly in sequence. My understanding is the warrants expire with the refinancing but I guess until I see that happen I'm in some doubt. The refi is within the next few weeks.
In 2024 the trading update was 13 Jan. Guidance will probably be either on the refinancing or the trading update, rather than its own announcement.
In 2024 finals were 24 April. Once they are published the data in the likes of stockopedia gets updated and those historical accounting markers get reset. At the moment, for example, the current ratio looks very bad as the entire debt is short term as it all expires June 2025.
Buybacks (and or dividends) can start anytime after the warrants have expired as they are entitled to be pro-rata made whole by any return. Management has been saying come the second half of 2025.
So these are all in about the next 7 months, which I think is short order. |
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