Gulf Marine Services Share Discussion Threads

[exbroker] 10/6/2021 16:39

Todays volume is over 20% of the shares in issue, expect a holding in company soon!

[horndean eagle] 10/6/2021 13:37

I think current management should be commended for coming in and agreeing much better terms for shareholders. The open offer gives shareholders the chance to stand their corner so the level isn't hugely important. Looking forward the backdrop is very strong. Bank terms have been backdated to Jan 1st so the p+l will look pretty good straight away. They can start focusing on debt reduction. They will need to raise funds next year but if market conditions stay strong then you would expect the shares to have re-rated materially. Good potential here for a multibag if things pan out as expected.

[xxx] 10/6/2021 12:12

1/see Mazrui TR1 25/5/21

2/Moving this kind of rig to a different basin is unusual ie an exceptional cost.[see previous movement hx ].

3/ You need to consider for yourself why the management might not discuss current trading, depite trying to buy the whole business previously, stating they would like to merge with their private holdings and continuing to increase their shareholding.

The preevious management team manged $US50m in EBITDA in a year when a number of competitors went bust. The current management took over in Nov 2020.

If people are interseted in the situation they can read the various sources of information and form their own opinions.

[gen_romer] 10/6/2021 11:50

@xxx - 1. Haven't seen anyone in the management or the board buy a single share!Guess they knew it was coming at 3p, so why pay 6p
2. It was right of them to include the $7m above EBITDA. So 2021 will look good optically
3. You still haven't explained as to why the board/mgmt is not being transparent about the business upside.
Agree with rest of your points

[candlestick1] 10/6/2021 11:34

I would say there is a persistent seller. There have been a number of 500k sells into every upward move. I can see this moving back up to at least 4p in the short term. Any new contracts and its game on...

[exbroker] 10/6/2021 11:20

A couple of points from various post in the last two days.
If Seafox wanted to take over GMS they could have got a rule 9 exemption from the takeover panel and done the placing at 10p with them underwriting it all. They would then have ended up with about 75% of the equity.
The placing is open to ALL shareholders so there is no dilution if you take them up.
The adjusted price allowing for the 19 for 10 is about 4p.
The share price has fallen either because there is a significant amount of round tripping against the open offer or there is a seller in the market.
If the latter, then this could be a good buying opportunity see wigwammer post 1621.

[wigwammer] 10/6/2021 10:41

A prior management team has over leveraged into an oil downturn. That's the mistake. Done and dusted. Since then, any management team is just rearranging deckchairs. The point for an investor looking today is - £33m market value, £141m tangible equity, and a gigantic £463m asset base being leveraged into an oil upturn. GLA :)

[swanvesta] 10/6/2021 10:34

"Everything that the new management has done, has been to create uncertainty for shareholders, whilst obscuring the strongly performing underlying business."

Sorry, that's not the perception I've had. They've repeatedly sounded positive about trading, albeit without much detail.

Re the share price drop, anyone holding 10 shares yesterday has an entitlement to 19 of the new shares. If they need cash for that they can sell their holding now at any price above 3p and make money.

[swanvesta] 10/6/2021 10:23

Can someone provide the evidence that the old management were handling things better?

Looking over past RNSes it looks to me they made a deal with the banks that would require either a $75m placing by end 2020 or 20% warrant issuance + additional PIK interest (where are the terms for these?) though some of this could be canceled/terminated on early repayment of $100m. They expressed an intention to raise the $75m but I can't find any record of an attempt to do so, though they did go for the warrants and failed. Apparently fees of $15m were booked for the negotiation, which the banks stated they were not willing to change further (and yet they eventually did...)

The new management negotiated a deal that lowered interest for 2021/2, saving $53m, got rid of the warrants/PIK and postponed the need for a placing, the bulk of it to end 2022. Can someone explain why this is worse?

On the face of it, it's hard to see how the old management had the better deal from the banks. Or why, if a $75m placing was the best way forward, they did not pursue it immediately while the share price was higher than it had been for years.

[wigwammer] 10/6/2021 09:56

Strange thing is, this is effectively an open offer, not a rights issue. So why on earth have the shares fallen so far? The whole value of an OO over an RI is you have to own the shares to benefit from the discount.

[xxx] 10/6/2021 09:42

Everything that the new management has done, has been to create uncertainty for shareholders, whilst obscuring the strongly performing underlying business.

why ?
well the current management own a similar, but more commoditized business and they have previously tried to take Gulf marine over in order to merge with that company.

What aspects of management behaviour ?
They have negotiated a reasonable deal with the bankers. However the way they are presenting it to shareholders is designed to create uncertainty. Thus, the last set of reports were not audited and the outlook statement lacks reasonable detail. Remember, the obligations of the management are to run the company for the benefit of all shareholders equally.

They have waited until the last minute to announce the fund raising and most unusually, there is nothing to support a presentation of current trading and prospects for GMS to shareholders.

The fund raising has been organised so there will be an avalanche of new shares, which are priced much lower than they could have been priced at under the previous management 1 yr ago, despite underlying trading being less good than now.

Unusually, there was no upate on trading given to shareholders at the AGM.

The fundraising offer document has 15 pages of risk.

The management have had the Q1 figures for a while now and could have published them, but chosen not to.


How do you know about underlying trading ?

1/ The fund raining document reports one sole figure regarding trading. Utilisation rates for 2021 are already at 80%. This is a golden figure as once utilisation rates get above this figure day rates go up and in this business, when rates go up, they accelerate fast.In previous up cycles, day rates are 3-4x last year's rates , when they still managed to earn US$50m in Ebitda, at a time when oil prices were on the floor.In fact, EBITDA was higher, they checkily reduced it by $7m by including a relocation cost above the line, when in fact it should be an exceptional item.

2/ Looking at companies in the same space, Maersk, Valeris and sector experts like Rystad energy are all reporting a significant pick up in utilisation.

3/ But the GMS kit will benefit more so than the average jack up, as it is easier, safer and faster for well intervention, decommissioning and a number of other uses. In addition, for wind turbine installation.

4/ The management have bought more shares in the past few months and not at 3p, a sure sign of confidence in the attractions of the underlying business.

5/And to underpin the demand side for the company's kit, oil prices are hovering around $70/bl before most economies have opened up, and LNG + nat gas pricing is even stronger. Thus to fulfill this demand, oil companies will need the kit to support production.

6/ Unlike previous cycles, there is no new kit coming on stream which has in the past increased capacity and reduced pricing, thus increasing the attractiveness of GMS assets.

7/ See the 22nd April note from Panumure with a TP of 20p

This cycle is just starting and will go on for longer than previous cycles due to this lack of kit. Mansour Al Alami et al know this and are trying to obsure the picture for shareholders and other investors. They are relying on investors to continue looking in the rear view mirror and clouding that with partial and misleading information. He and his associates are already in the same business and are aware of the strong uptick in demand
Remember he is executive chairman, no CEO. And the independent directors ?....reliable friends of his.
In English law, directors have a fiduciary responsibility to shareholders. They have patently failed in this duty.

But they own a minority stake and whilst that is so all investors alike can benefit, as the improved trading will show up in the figures over the next 6 months. Therefore a new bid from them in that time frame looks precitable.{They previously bid for the company at

[trident5] 09/6/2021 23:15

Agreed - shareholders would almost certainly be better off under the previous management.

[marben100] 09/6/2021 22:12

The previous directors were on the point of reaching agreement with the lending banks and could probably have raised equity at a better price than this. Seafox et al scuppered the deal, claiming they could get a better one. Today's announcements are the result - and, as has been pointed out, further capital will still need to be raised.

IMO the current board is seeking to takeover the company at the lowest possible price.

[swanvesta] 09/6/2021 21:35

marben100, I'm new here. Were previous management better for shareholders?

[trident5] 09/6/2021 19:32

M100 - yes, that was the lesson and an expensive one too. Don't invest in companies with too much debt and there was way too much debt here.
And then as you say - the big shareholders here will not have the interests of other holders in mind.

[marben100] 09/6/2021 19:25

The simple lesson is to avoid companies in highly cyclical sectors that carry large amounts of debt. PMO (now HBR) was another prime example.

They get screwed when the cycle turns, no matter how good/cash generative their assets look at cycle top.

I made that mistake investing here in 2014- 2017, but by late 2017 I could see the writing on the wall and managed to exit @ 58p, salvaging some of my capital when taking the loss. [Benefiting there from an earlier lesson that I learnt that when there is any doubt about solvency/bank covenants, get out right away.]

Sympathy to Wad Collector and any others who hung on, hoping for a recovery.

It became total bargepole IMO when the board was replaced by hostile 3rd parties who certainly don't have independent investors' interests at heart. V disappointed that they managed to gain control.

[trident5] 09/6/2021 18:32

And what did you learn?

[wad collector] 09/6/2021 17:21

Oh dear , another lemon in my pile of citrus fruit shares. 2p , 3p , 5p , 10p , 20p (!) makes little difference to a long term holder who gambled on this buy 5 yrs ago. Worst thing about having them ISAed is I can't even take a capital loss. Live and learn....

[exbroker] 09/6/2021 11:21

Zen you are correct, the adjusted price allowing for the open offer to holders is almost exactly 4p so I expect them to go better over time, I do hope so given I am long of them!

[exbroker] 09/6/2021 11:19

The new shares are not issued until the 28 June so any sale must be of existing shares unless you can borrow them to deliver to the market. There is a round trip but doing it gets you diluted.

[zen12] 09/6/2021 11:19

Yep and should see a sharp rise 4-5p..

[swanvesta] 09/6/2021 11:11

See Exbroker's post above. Trading has improved dramatically, debt is already being repaid and another $50m would incur vast dilution. They negotiated the delay specifically because they anticipated it would be easier/cheaper to raise end 2022. Lets see how trading goes in the next 12 months and where the share price ends up.

[csmwssk12hu] 09/6/2021 11:06

Next news will be raised money this is forward selling for easy money

[technowiz] 09/6/2021 11:02

foreward selling of shares? hence share price dropping towards 3p.

[eezymunny] 09/6/2021 10:47

swanvesta

If they have to raise again why not do it now and pay down expensive debt? No reason to delay AFAICS. Perhaps there are no takers right now for the other $50m?