Gulf Marine Services Share Discussion Threads

[hpcg] 01/10/2024 11:15

elsa7878 - Seafox isn't selling any shares. It is distributing its shares in GMS to its own shareholders until it gets down to a 10% holding. The availability in the market is one or more of those recipients selling.

[elsa7878] 01/10/2024 11:14

If it's now under 90 million shares. It's under £13 million. Surely there MUST be some institutions out there who must think it's a decent investment. Around here it is 50% of NAV!

[xxx] 01/10/2024 11:10

hcpg, yes there is a strong element of shiny new toys about increasing capacity. Management get more assets to play with, customers are enthusiastic and shareholders pay either by deferring dividends or cash calls or both plus borrowings.

So it is important to keep management on track. The maths is straighforwards and yes, they want to get the nett leverage ratio down to 1.5 before acting, but there is nothing magical about this figure, we pay ~8% on debt and buying in shares moves value strongly in favour of the remaining holders. Hence my suggestion for holders to contact the board and express their preferences and reasoning.

[jsg123] 01/10/2024 11:07

I can't see how this isn't going lower until everything evens itself out

[elsa7878] 01/10/2024 11:04

90 million to go.....

[jsg123] 01/10/2024 08:51

You can say that again.
It's no wonder it's falling like it is, buys are registering as sells. Mine just did.

[elsa7878] 01/10/2024 08:12

Thanks for that. This relentless selling is unnerving but the business is fundamentally sound so guess we just have to make it play out.

[hpcg] 30/9/2024 15:41

elsa7878 - I would say these aren't cyclical any more. I went through 4 cycles in oil services and they were near enough identical with the exception of the pandemic. We have seen very little new build of equipment post the pandemic because a) balance sheets needed to recover, b) oil production is peaking and one can't put a 20 year business plan together, c) US onshore has added a high frequency response to lower oil prices and all the cyclicality lives there, d) shipyards have been full of container ship orders.

Oil services cripple themselves each cycle once oil companies have rebuilt their own balance sheets and go into expansion mode. Prices go sky high in the spot market and some capacity is booked out for several years to come. People that run oil services companies are some of the most gung-ho one could ever meet and they extrapolate these prices and this activity forever, meanwhile their employees who've seen it all before shake their heads. I have literally heard execs I worked for saying things like, "if we don't build it someone else will". It is why after I'd been through my first Chapter 11 I started preparing for an ultimate and inevitable redundancy! As I say the splurge has not happened in this sector this time which means they cycle will either not happen or be shallow.

[thebd11] 30/9/2024 14:55

This makes all good sense to me and is consistent with how I'm viewing the situation through conversations with all involved parties. Worth noting that I'm not expecting a change in capital allocation (e.g. payment of a div / buybacks / new vessel purchases) until debt is more of the 1-1.5x. That's likely at this rate to be mid next year some stage, I believe.

As for why only another 5m to be sold - that's simply because not ALL of the 150m distributed is to be sold. If it was, why didn't Seafox simply place them and then distribute cash? The very fact they have done it this (slightly unorthodox) way shows you that many of the Seafox holders (who are now, in turn, direct GMS holders)do NOT want to sell at this level. Ergo, overhang is overdone. This will shortly be cleared (if it hasn't since my earlier post) - I had somewhere like 18-20m of the 150m to be sold initially, and then the natural selling pressure across market today sweeps up the rest. Overhang soon done in summary. Good chance to get in / top up if haven't already (which I have done - so not just hollow words from me), and good news for holders that this 'technical' brake on the share price should soon be lifted.

Stick these in a tin under the bed, revisit in 5 years. Not going to lose sleep over some minor fluctuations here

[elsa7878] 30/9/2024 14:53

The company should sell a vessel now. Pay off a some of the debt and instigate a buy back of say $20-$30 million. That would take out the Seafox shares and some of the warrant holders (not all will want to sell) and indicate strongly that a valuation at or near to 50% of NAV is ridiculous.

Talk of buying additional vessels is absurd and in itself has been damaging. They should clarify this asap (like they have in private apparently).

If they navigate this cycle successfully (as they seem to be doing) they could then reinvest at the cycle lows.

[hpcg] 30/9/2024 14:40

Jsg123 - Seafox, a private company, talked to its shareholders about how best to distribute its share holding in GMS. Presumably some said, we'd like in-specie as we don't want any more given away at 17p. Others presumably said, we'd like in-specie because we want to convert some or all to cash. Whichever, the owners of Seafox, in majority, decided they wanted most of the GMS holding distributed with a rump held so that Seafox has influnece over GMS and no one does anything stupid like build new vessels. thebd11 would know a lot more so thank you for some more information.

So far as I am aware the company does not need to ask permission from lenders to buy back shares now even. It shouldn't do until the leverage ratio is below 2 and interest is minimised. I think it does still require permission to pay a dividend, but will not once the new financing agreement has been executed.

Its my opinion here, but I think companies should always distribute large shareholdings to their shareholders. It always reduces the overhang if a few want to exit.

[jsg123] 30/9/2024 13:49

Why only another 5 million at this price? Are you talking about the stock seafox sold?
Isn't there another 120 mill to be distributed?

[clem h fandango] 30/9/2024 13:45

14m chunk gone through at lunchtime.The overhang being chewed away at, meanwhile those shares transferred to safer and presumably longer term hands.It's a sit on hands time for now, or accumulate if you have the cash.

[thebd11] 30/9/2024 12:16

Agree with this completely. Failed takeover from Seafox, who (from what I've heard) then ahd THEIR shareholders disagree over how they should handle their stake. In the absence of reaching a consensus, Seafox decided (quite smartly IMO) to distribute the shares in specie to allow their individuals to then decide. Clever politics, and unsurprising that some of the individual investors in Seafox want just to cash in. I'm led to believe that these people are Middle Eastern large family offices, some royal families etc etc, so this is just chump change to them.

I can't see more than another 5m at this price available, so overhang should be cleared soon!

[mikeh30] 30/9/2024 12:04

Seafox supported the £20m raise years and years ago to save the company. Said company has turned aroundSaid shareholder cashed some chips in

[jsg123] 30/9/2024 12:00

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

[xxx] 30/9/2024 11:45

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.

[thebd11] 30/9/2024 11:33

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...

[hpcg] 30/9/2024 11:32

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.

[jsg123] 30/9/2024 11:20

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

[wigwammer] 30/9/2024 11:08

Surely that would send the oil price up (it isn't)..

[beardinspace] 30/9/2024 10:16

My guess the drop today would be fears of wider ME conflict but who knows.

[tourist2020] 30/9/2024 10:00

Topped up at 15.40. Is the weakness warrant holders cashing in or maybe fears of wider ME conflict?

[hpcg] 26/9/2024 16:02

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.

[wigwammer] 26/9/2024 12:24

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.