I intend opening a position in any stocks mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Gulf Marine Services (LSE: GMS) is the largest provider of self-propelled, self-elevating accommodation jackup barges in the Middle East, and one of the largest worldwide.
The company constructs and maintains its vessels at its yard in Abu Dhabi and has an extensive new build and replacement programme.
Gulf Marine 1 Year Chart
The one thing that surprises me about this stock is that since it’s IPO on 19 March 2014 closing at 130p the share price sank to 95p 9 months later on no news whatsoever.
A set of interim results was released 28 August 2014 in which revenue and net profits increased:
The Group delivered a solid set of results during H1 2014. Our operations during H1 2014 have resulted in increased EBITDA (after adding back IPO costs) of US$ 58.6 million (H1 2013: US$ 57.4 million). Adjusted net profit (excluding IPO costs) for H1 2014 improved by 17% to US$ 38.1 million. Adjusted EPS was 11.45 cents.
Leaving the financial gimmickry of adding back/including IPO costs aside, Gulf Marine still increased revenue and earnings.
It was since these results that Gulf Marine’s share price began it’s ‘no news’ precipitous decline during which it paid it’s maiden dividend on 27 October 2014 of 0.41 pence per ordinary share and kept publishing announcements of several contract wins providing potential and existing shareholders with clear earnings visibility.
The balance sheet has been slightly weakened with a current ratio of 1.82 down from 2.11 before the IPO due to ‘a reclassification of US$39.2 million in obligations under finance leases from non-current liabilities to current liabilities (31 December 2013: US$ 5.7 million), as the period remaining for the option to purchase a leased vessel is now less than a year.’
An interim management statement dated 5 November 2014 announced:
- New build programme on track to deliver 66% increase in fleet size by 2016
- Recent contract wins increased secured backlog to $547 million
- Full year results are anticipated to remain in line with expectations
This is clear earnings visibility with 85% of the fleet’s charter time utilised.
Duncan Anderson, Chief Executive Officer of GMS, said:
As we discussed in our Interim Results, demand for our SESVs across the MENA region is excellent and the market for our assets in Europe also remains strong with our entire fleet of ten SESVs currently chartered. Our backlog has increased by nearly 50% since August with recent contract wins. Our clients are responding to the low-cost benefits that our SESV solution provides them, which is increasingly relevant in the current oil price environment. The outlook, driven by our core brownfield (opex-focused) oil and gas client base, underpins our expectation of continued strong demand going forward. This, together with our ongoing new build programme, will help to maximise opportunities with existing and new clients
Since this interim management statement, Gulf have continued to announce contract wins and extensions.
They are due to release preliminary results on 24 March but I’m not waiting until then.
Long on the open Wednesday morning.