Gulf Marine Services Share Discussion Threads

[loglorry1] 15/10/2021 10:09

I agree with you @wigwammer but simply but there are similar vessles for sale in the region currently and no bidders. No other operators have cash to expand fleets. Clearly banks love physical assets but they can't operate them themselves so view them more on a discounted cash flow basis. Anyway its a small point. For me this is all about hitting EBITDA targets and managment being laser focussed on so doing.

[wigwammer] 15/10/2021 09:54

Thanks log. You make some balanced and intelligent points. I would suggest the asset values are meaningful however - 1) the values will be assessed and verified by an independent auditor.. 2) lenders will be cognisant they are extending against physical assets.. 3) most importantly, the asset size/value indicates a great deal about the cost of entering and competing in the industry. The barriers to entry are significant. ATB

[loglorry1] 15/10/2021 09:53

@xxx the market is better since the oil price picked up and managment have guided that things are defintely on the up with utilization and rig rates nudging up. This is reflected in guidance

Panmure Gordon have EBITDA forecast as:

2021 $67.7m
2022 $74.6m
2023 $79.4m

Obviously if they hit this (and they are on track) then you likely avoid dilution and have a company with much lower net debt and c$80m of EBIDA. That is going to be a monster re-rate.

[xxx] 15/10/2021 09:45

@log, you are correct, stating a general assessment.
What your view ignores is the particular market the co. operates in.

[loglorry1] 15/10/2021 09:23

@wigwammer I agree with all that but would make two ponts. TBV is really about what the boats are worth and since there is almost no secodary market its really a view on discounted cash flows they produce so once again we are back to untilisation and rig rates.

Further the current 16p is only valid IF they avoid further equity issuance (at a low price). This is still in doubt and requires (but may not be sufficient) hitting the 4x target.

I'm not de-ramping I'm just pointing out that there are many moving parts.

[wigwammer] 15/10/2021 09:02

Another thing an ev:ebitda valuation won't capture is the benefit of the very low tax regime in the geographies they operate in.

[wigwammer] 15/10/2021 08:58

Log - you can us an ev:ebitda, but obviously given the gearing, each increment your target valuation is above the current valuation has a leveraged effect on the implied market value, or share price. The really ridiculous multiple at the minute isn't just the PE, it's the price:tbv. With tangible book of over 16p the discount appears nuts going into a cyclical upturn. Obviously, as the debt is repaid and if/when the assets are revalued upward, that tbv figure will rise even further. But just on the back of today's 16p figure, the discount appears far too large. ATB

[trident5] 15/10/2021 08:55

It's been "tipped" on Stockopedia this morning.

[pictureframe] 15/10/2021 08:47

Boom....breakout

[loglorry1] 13/10/2021 16:53

Nice to see a director buy. I am cautiously optimistic but don't get too carried away with the low pe. The EV is much bigger so its not the best multiple to look at. The best is probably EV/EBIDA. As Jaknife has pointed out this is forecast to drop to just below 4x and if it gets there GMS equity should avoid significant dilution. From that point it should be a fantastic transfer of value to equity from debt as debt is repaid and happy days.

Plenty can go wrong of course.

[wigwammer] 13/10/2021 16:26

Probably bought them off you, along with the others he bought from you at 3.2p :)

[trident5] 13/10/2021 16:19

All of £23k.

[wigwammer] 13/10/2021 15:51

Director purchase :)

[wigwammer] 13/10/2021 15:44

I agree exbroker. And yes the debt is high but so are the the assets. Tangible equity ratio is over 35%, which is pretty healthy. ATB :)

[exbroker] 13/10/2021 15:35

Looking at the earnings this stock could be on about 2x this year’s numbers if the hire rates continue to work through. That should make next year below 2x earnings, find me another stock like this. I agree there is a lot of debt, but it could go a lot higher in the medium term

[blueball] 13/10/2021 14:17

Just needs Zac Mir to tip it in his daily chart review.

[wigwammer] 13/10/2021 07:38

16.6p equity per share. Way underpriced, imo.

[wigwammer] 13/10/2021 07:18

"The Group is also currently assessing if secondary alternatives to the equity raise exist to prevent the issuing of warrants if the second tranche of equity is not placed by the end of 2022. This initiative is supported by the opportunity to significantly reduce leverage levels, through improvements in underlying trading results driven by the positive outlook."

[wigwammer] 12/10/2021 22:46

Hi log.. they are targeting $38.5m EBITDA in 2H21, which equates to $77m annualised already. Much of this 2H business will have been written many months ago, since when oil/gas prices have risen considerably driving higher day rates. By way of comparison - they achieved circa $125m pa at the operating level both in 2015 and 2016.

[loglorry1] 12/10/2021 18:01

That's the hope. $100m is very optimistic. Also if they got to this point the banks would probably waive the equity raise requirement because they would be on a very low ebitda / ev multiple.

[wigwammer] 12/10/2021 17:05

But if the company is generating $100m EBITDA annualised, surely there will be high demand for both the shares and associated rights to participate in any raise? If so, the issue price may be far higher than where we are now. Or at least, that's the hope!

[loglorry1] 12/10/2021 14:22

For sure Exbroker but then again they will be a year closer to the deadline to raise a further $50m unless they can convince the lenders otherwise.

It's good risk/return here though but I wouldn't go too mad.

[exbroker] 12/10/2021 13:53

From my post 1690 in July
"If you assume that over the next year, they generate free cash flow of £40m which maybe on the low side, and that the enterprise value of the company remains the same then the share price should be around 7p. If you get more debt reduction or the market rerates the stock, then that could be a minimum price."

Seems more likely now than then but I will stick with my 7p price target at the moment, there may be more news with the figures.