Gulf Marine Services plc (lon:gms)
Gulf Marine Services – Buy Now Or Wait For Recapitalization?

Gulf Marine Services plc Financials

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Gulf Marine Services plc Share Price
Grade:The Orange Grade - Shares That I Think Show Promise With A Few Caveats.
Title: Gulf Marine Services – Buy Now Or Wait For Recapitalization?
Company: GMS - Gulf Marine Services plc
Share Price Then: 9.38p
Author: Ian Smith
Date: Wed 19 Dec 2018
Comments: Gulf Marine Services hire out oil drilling and exploration platforms and ships with a fleet of relatively new kit.

They have been caught up in the recent drop in oil exploration and today (19 Dec 2018) issued a trading update saying that they expect to breach some of their banking convents by the end of 2018, hence a 60% share priced drop.

The update also included “Whilst the Group can continue to trade effectively in the near-term, the Board is currently considering a number of ways of addressing the Group's long-term capital structure.” In other words there may be a debt for equity swap or a new share issue.

On the plus side they talk about a 70% utilisation of their fleet during 2018 but at depressed rates which are expected to remain depressed in 2019.

As their fleet is new and there is still plenty of exploration to be done the longer term does look promising

As the shares typically has a very low trading volume and spreads around 5%, it seems that it is either a try and day trade it today and tomorrow after that share holders will be stuck in whatever position they have until the re financing is announced and no real recovery until 2020 and onwards.
Read Count: 283

Buy/No Buy In A Nutshell
NegativesIs the oil exploration business dying off forcing the prices charged by drilling equipment hirers down to far?
PositivesA modern fleet and equipment.
Initial Review Price11p
Last Review Price11p
Last Review Date15-Jul-2020
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Share Commentaries, their purpose.

Previous Commentaries On Gulf Marine Services plc
Date Share Price Author Commentary
Tue 08 Aug 201740.43pIan Smith

Gulf Marine Services Floated At Too High A Price Or Just Another Suffering Oil Industry Company?



Gulf Marine Services were established in the UAE in 1977 and listed in London in Feb 2014, and so far they have looked good with dividends in April and Sept each year.

They build and then rent out advanced self-propelled self-elevating support vessels (SESVs) mostly to the Oil Industry but also Off Shore Wind Farms.

So why has the price gone from 135p to 40p, the share price has been struggling since the start of 2016 in the 35p-75p range.

The first thing to note is that Private Equity bought out the company in 2007 and put in place a new management team. Since then the company has grown from 3 SESVs, with one under construction to 15 SESVs.

It is worth nothing that the CEO hasn't changed since then which is a pretty long time for a CEO.

There has been good revenue growth between 2011 and 20015, going from $106m to $220m, and profits of around 30%, but in 2016 turnover dropped by about 20% to $179m and profits from $75m to $30m.

Debt is fairly high at $370m.

The last trading report had usage of the fleet at around 54% dropping from 74% in 2016 and 98% in 2015. This is clearly an area of concern, expensive assets not earning!

It appears that the company has built a new fleet just in time for the oil price tumble.

Unless they have built the wrong type of vessels the main problem seems to be that the demand for all oil exploration related equipment is weak.

If the oil price recovers then the company a major player in the market with a range of new SSEVs seems very well placed.