Gulf Marine Services Share Discussion Threads

[catsick] 18/9/2023 09:47

At the moment most rig companies are trading above current book value which for gms is about 22p, the ebitda yield on book value is about 14% which is in line with what you would expect for 20-30 years life assets like rigs ships or planes looking at similar small cap quoted dry bulker and aircraft leasing companies, this company is way too cheap and I can see in a year or two, with debt substantially reduced a price of 30-40p

[baddeal] 14/9/2023 08:46

Any posters seen recent broker forecasts for gms?I'm think 15-18p within 18-24 months based upon continued good utilisation, reducing (hopefully) int rates and continued deleverage but interested to know other forecasts out there.

[hpcg] 13/9/2023 10:33

Poised to break out higher, classic bull flag completion.

[hpcg] 01/9/2023 14:55

NChanning - the declining cost of debt is a big part of the story. As you say, with a company on firm footing, and hard asset backed, there should be some competition amongst lenders.

With the warrants so far in the money we can also add £7,881,857 to company funds. I would have thought we'll see some cashed in. The lenders can do that synthetically by shorting but that seems an expensive way of doing it when profits can be put into lending elsewhere, or the P&L account.

[nchanning] 01/9/2023 12:53

Let's say in a couple of years that EBITDA IS 100 million debt is 200 million , the Fed funds rate is back to 3% , the debt can be refinanced with a smaller margin as the company is less distressed . Perhaps GMS stops paying down debt and starts paying a 50% yield on todays share price

[hpcg] 01/9/2023 11:07

wigwammer - GMS failing, as in going in to administration, has been off the cards for a couple of years now. It is the terminal value that investors are trading against. Pretty clearly the debt will be paid off before the assets are redundant. Add the interest payments and principal repayments and a debt free company is throwing off cash at an alarming rate. We'll get a dividend before that point, though not for a few years, though that is Libor dependent.

[wigwammer] 31/8/2023 19:52

Remember the debt holders now own a material equity exposure via the warrants... they don't want GMS to fail... ATB

[gen_romer] 31/8/2023 13:03

of course they had a choice to not to cut costs,keep utilisation at low levels (previous mgmt guilty of all this),and dilute existing holders with another capital raise-give credit where it is due

[blusteradjuster] 31/8/2023 13:01

Obviously just a forecast but LIBOR predicted to peak end-2023 and fall rapidly during 2024.

hxxps://longforecast.com/libor-forecast-2017-2018-2019#:~:text=LIBOR%20at%20the%20end%204.792,rate%204.825%2C%20while%20minimum%204.279.

[trident5] 31/8/2023 11:17

"Got to give it to them on the deleveraging progress" - like they had a choice?

[gen_romer] 31/8/2023 11:12

Interest expense for 2H should be lower,15m tops.So 37m EBITDA leaves them with min. 15m in loan repayment after paying maintenance and taxes.Also most likely they will beat the guidance if no screwups.Got to give it to them on the deleveraging progress and getting off the "distress" list.Helps them to avail better margin on the loan and reduce interest cost further

[trident5] 31/8/2023 10:42

hpcg - useful post, thank you.

Still a long haul, at this rate they need 5 years to clear the debt. The backlog is a marked improvement but doesn't seem to translate that well to the bottom line; there seems to be a structural decline on day rates from several years back.

Market reaction so far seems benign.

[hpcg] 31/8/2023 10:19

Rates up and utilisation up. Backlog is almost double what it was 12 months ago.

During the year, the interest rates on the loan went up from 3% at end of 2021 to 7.7% at the end of 2022 (being 3% plus LIBOR) and as LIBOR increased from 0.2% to 4.7%. Going forward, the interest rates will go up to 4.0% + LIBOR and a PIK margin of 2.5% will apply for as long as leverage remains above 4.0 times EBITDA.

12 month USD Libor hasn't changed that much this year, though it is now at highs:

So it is a bit tricky to predict the interest bill. I'd hazard somewhat down based off a lower and ever decreasing principal, no PIK, but higher LIBOR. That said the RNS about the PIK cessation said: "This means that moving forward, the cost of funds will decrease by 340 bps." So interest paid hit a high water mark in the half just gone.

Interest in FY2022 was $17.6mn so I would guess this year we are looking at $35mn and forward 12 months about $27mn, assuming rates stay at about this level, which seems more likely than not. These calculations aren't even back of the envelope, just in my head.

Trident - H2 profit and repayments should be about the same as H1 at the top end of EBITDA forecast, circa 6p mid range and 4p at the bottom. Similar for principal repayments with a minimum of $10mn repaid and $20mn more likely.

[blusteradjuster] 31/8/2023 09:55

Full Year 2022 EBITDA $71.5m



H1 2022 EBITDA $37.3m



Therefore H2 2022 EBITDA was $34.2m



H1 2023 EBITDA $44.3m

H2 2023 (forecast) $32.7m - $40.7m (mid $36.7m)


From these numbers it seems there is some 'seasonality' in the incomings/outgoings - with EBITDA weighted to H1.


So I'd be careful comparing H2 with H1 and making gloomy conclusions.

[loglorry1] 31/8/2023 09:53

Don't forget interest costs will drop a lot in H2 becuase they hit below 4x EBITDA/Net Debt so in H2 we sholud see interest cost drop by $6m.

[jimbox1] 31/8/2023 09:53

The Interims show good performance regarding revenue and margins, but the rise in interest rates has hit the bottom line and is a big drain on cash.

Everything has to go just right over the next 12 months to cover debt repayments of $42m and interest of circa $25m. If Operating Cashflow is maintained around $80m, this is manageable, but there is little headroom.

Trade Receivables ($37.6m) represent 197 days of revenue. It must be a continuing battle to get paid.

I think we have to keep fingers crossed.

[wigwammer] 31/8/2023 09:46

But will still result in a highly material net debt reduction over the year, a process which has already driven a 60%+ rerating of the shares recently. Predicted by some, not by others.. ATB

[trident5] 31/8/2023 09:31

Well presumably all other things being equal such a decline in EBITDA results in a 2H loss and an inability to pay the amounts of interest and debt paid in 1H.

[wigwammer] 31/8/2023 09:12

Mid range expectation for H2 would suggest $37m EBITDA in H2, so a sequential fall, but a fall largely predicated by a very positive H1. As a holder, I'm not gonna be crying... ATB :)

[wigwammer] 31/8/2023 09:07

Or, H2 forecast to be higher than H1. The only new information we know today is that H1 has gone well, and EBITDA has been revised up. Cheer up fella :)

[trident5] 31/8/2023 09:02

Or, H2 forecast to be lower than H1.
Interest payments really hurt; not sure it's appropriate for a company like Gulf to focus on EBITDA.

[wigwammer] 31/8/2023 08:58

Yes. Upgraded EBITDA forecast, and I'm pretty positively surprised by the $21m+ net debt repayment too. If they can replicate that in H2, then net debt getting down toward levels the where the market may again materially reprice the equity.

[nchanning] 31/8/2023 08:38

Will be good to see the broker note, but this is the point where deleveraging should really start to accelerate . Upgraded EBITDA forecast looks pretty beatable with more than half of upper end already secured in H1

[trident5] 25/8/2023 17:28

It was breached last month on thicker volumes.