Gulf Marine Services Share Discussion Threads

[wigwammer] 04/5/2023 09:59

Say GMS get net debt down to around $250m over the next 2/3 years, they sustain $80m EBITDA pa and pay $15m on capex and tax. That will leave them earning $40m pa bottom line or around 2.8p a share. With the net debt at manageable levels, perhaps the market will put a 10x multiple on that 2.8p. Gives you a price per share of 28p vs 5p now. If the valuation alone isn't a trigger, there is always the offshore wind and renewable "themes" which may spark interest at any time... I suspect if the world just muddles through the current malaise, GMS will be a very nice earner over the next few years. IMO

[blusteradjuster] 04/5/2023 09:16

My post on 24th April concerned debt interest rates, not day hire rates - should have been clearer :)

Powell suggests the Fed are done for now but hints at steady rates for the foreseeable. He would say that, of course. Bond market moves seem to think cuts are on the way - macro data and any further fallout in the banking sector might change thinking.

What any future central bank action means for GMS is debatable of course..

[gen_romer] 04/5/2023 09:08

Like dual listing?Not sure if holders on LSE can be on the arabian exchange.But yes,makes sense-this is what happened to Ades taken private few years ago.Need something like this for the stock to spike,otherwise i see this stuck at below 5p for ages

[catsick] 03/5/2023 14:01

The smartest move might be to relist in saudi, that market is flush with capital and its where the rigs are.

[gen_romer] 03/5/2023 13:35

what is the trigger for rerating?if it is dividends,we are years away.

[nchanning] 03/5/2023 13:07

The build cost of their fleet was a billion dollars and there's been considerable cost inflation since then . Ok a brand new fleet would command a small premium in day rates but who would consider building a billion dollars of new rigs in this interest rate environment , in a cyclical industry without an EBITDA approaching $200 million dollars . So the iron laws of capitalism will gradually reduce supply as old ships retire till the market is in balance again

[catsick] 03/5/2023 11:48

I think rates are going higher, nobody is commissioning new rigs, plus these service rigs are being used for wind farms, plus higher interest rates make it less likely to build new rigs, once the market is tight, which it is becoming, day rates can go to the moon as all the oil companies are flush with cash ....

[blusteradjuster] 24/4/2023 16:45

A lot depends on the 'new normal' wrt rates.

Personally, I see the current situation as a temporary hangover from COVID/Ukraine invasion i.e. the natural rate is lower than here.

I guess that's, in part at least, where the risk/reward is.

[wigwammer] 24/4/2023 16:23

Take your point bluster. But even with a $30-35m debt charge, they can pay down a material $20-30m pa... do they need to get down to $250m before the market rerates it on a reasonable eps multiple? I don't think it does - because both the fax and capex demands here suggest a higher than average debt:ebitda multiple is appropriate ... is the market for offshore about to go t1ts up? Well looking at the latest TenneT contract news we may just be heading up...

[wigwammer] 24/4/2023 16:14

Cash from ops 83m usdCash tax paid 1.1m usdCapex spent 3.4m usd....That very simply summarises why GMS can sustain a higher than average debt load, and why the market is materially and excessively discounting the debt risk in the equity valuation

[blusteradjuster] 24/4/2023 16:08

Assuming rates peak or even head down this year, headwinds disappear or even flip to tailwinds.

Implied rates afaict are for cuts late this year/early next.

All other things (trading in the main) being equal, it'll be that first sniff of a cut that would create interest.

[wigwammer] 24/4/2023 16:04

That's certainly the consensus impression. But standard debt metrics suggest 3x EBITDA would be reasonable debt load, or around £250m... We aren't far off that now... but also bear in mind standard debt metrics are based on a tax rate of 20-25%, rather than the 3% here, and a decent capex burden (they own a pretty young fleet)... so the perception change required to carry this to a more normal earnings multiple (15p+) may not be as far away as consensus thinks.

[trident5] 24/4/2023 15:53

Long hard haul here.

[wigwammer] 24/4/2023 15:52

Higher rates will slow the rate of debt repayment, and I guess that's what the market is pricing in, but even so, $55m debt reduction in no way reflected in ev.

[wigwammer] 24/4/2023 15:21

Debt reduction of $55m over the course of the year worth about 3.5p a share, using a simple ev interpolation... response from equity market has been to send the shares DOWN 2p from 6.5p to 4.5p over the same period... Tangible equity per share moved from circa 17.3p to 18.8p over the same period.... The market perception here will sooner or later hit a tipping point, where the valuation of this equity moves parabolically upward... ATB

[blusteradjuster] 24/4/2023 14:56

Pushed that (arbitrary?) target back to sometime in FY23.


-- Net bank debt reduced to US$ 315.8 million (2021: US$ 371.3 million). Net leverage ratio reduced to 4.4 times (2021: 5.8 times).

-- The Group expects its financial performance to continue to improve and reiterates its EBITDA guidance of between US$ 75-US$ 83 million for 2023.

-- Group anticipates net leverage ratio to be below 4.0 times before the end of 2023.

[hpcg] 24/4/2023 12:05

They slightly undershot the debt repayment, 2022 results predicted the net leverage ratio to be below 4, which they missed.

[loglorry1] 24/4/2023 11:18

Yes they seem to be delivering somewhat.

[hpcg] 24/4/2023 11:07

Has everyone gone? First things first the debt situation is looking a lot better and the effect of higher interest rates probably less than anticipated. With the former improving again this year we can estimate the interest rate worst case.

It looks like the resting rate was somewhere around 4.5%, so lets call the new rate for 2023 at 10%, and an average of $300m borrowed across the year means a $30m interest charge for 2023. Alternatively, rates only started to rise in June, so lets say the delta represents somewhere between a third and a quarter of a full year so add $5.5m time either 2 or 3 to add on to 2022 to get to $31m or $36.6m. This doesn't take account of changes in the principal through the year. Assuming in all cases rates stay constant this year.

Revenue, based on projected utilisation and day rates should be $152m. This covers the interest increase, netting out in cost of sales an increase for the greater utilisation with the charge for the bankrupt customer.

So it looks like another chunk off debt, and at some point part of that has to get recognised in the equity side of the EV.

[trident5] 19/1/2023 16:39

The reasons it's cheap:

- real risk that the Board will take it off the market at a cheap price;
- lots of debt to be repaid;
- your NAV is not a realisable value - the main assets are vessels that bring in the revenue, but which would fetch a much lower price in a fire sale.

The background here is that GMS borrowed heavily to build up a fleet of state of the art vessels, then the oil price collapsed resulting in a big reduction in demand for these vessels together with a big reduction in day rates. Placings were needed to keep the company afloat and the share count is up very significantly.

The oil price has now recovered and demand is back but the day rates still seem subdued.

They need to pay down debt before paying dividends.

[dexdringle] 19/1/2023 16:07

Can you expand please on the nature of the conflict of interests? In what way are interests conflicted (as opposed to aligned)?

And why are they not paying dividends ?

[gen_romer] 19/1/2023 14:44

stranglehold by two large shareholders who have a conflict of interest with minority shareholders.cant think of anything else