Gulf Marine Services – Aiming to be the world’s best SESV operator, this ‘Forward and Upward Focused’ group is undervalued at 18.80p, brokers TP 32p

28.05.2025

If you are lucky enough to be in Abu Dhabi, in the United Arab Emirates, then perhaps this Thursday you should pop into the offices of Gulf Marine Services (LON:GMS) at the International Tower for 2.30pm (UAE time) to attend the company’s 2024 AGM.

If you do attend, then could you please listen to the proceedings intently and report your findings back to us?

I take the view that the shares of one of our UK Investor Shares for 2025 are looking very positive and offer some useful upside before the year is over.

Last night they closed up 4% at 18.80p and we see them rising a lot higher from this level.

Share Swings Over The Last Year

A year ago, the shares of Gulf Marine Services were trading at 20.60p, four months later at the start of October they were down to 14.55p, before a swift flurry of dealings whipped them back up to 19.50p.

They were back down to 14.85p by the third week of January this year, within days they sprang back up to 19.64p.

A similar pattern occurred early last month when they were as low as 14.44p, from where they have subsequently risen to 18.80p.

So, will they rise back up through to break the 19.50p to 20p range shortly?

Over the last couple of years there have been various disposals of chunks of the shares held by a previous bidder for the company, as it has ‘placed’ parcels of its previous near 30% holding in the group.

The very well-managed reduction programme on behalf of Seafox International has seen its holding gradually depleted to under 5% currently.

The Business

Founded in Abu Dhabi in 1977, Gulf Marine Services has become a world‐leading provider of advanced self‐propelled self‐elevating support vessels (SESVs).

The fleet serves the offshore energy industries from its offices in the United Arab Emirates, Saudi Arabia, Qatar and the UK.

The £212m-capitalised group’s assets are capable of serving clients' requirements across the globe, including those in the Middle East, Europe, South East Asia, West Africa, North and South America, and the Gulf of Mexico.

The GMS fleet of 14 SESVs is amongst the youngest in the industry.

The vessels support GMS's clients in a broad range of offshore platform refurbishment and maintenance activities, well intervention work, and offshore wind turbine maintenance work, as well as offshore platform installation and decommissioning and offshore wind turbine installation.

The SESVs are categorised by size ‐ K‐Class (Small), S‐Class (Mid), and E‐Class (Large) ‐ with these capable of operating in water depths of 45m to 80m depending on leg length.

The vessels are four‐legged and are self‐propelled, which means they do not require tugs or similar support vessels for moves between locations in the field; this makes them significantly more cost‐effective and time‐efficient than conventional offshore support vessels without self‐propulsion.

They have a large deck space, crane capacity, and accommodation facilities (for up to 300 people) that can be adapted to the requirements of the group's clients.

Institutional Investor’s View

Premier Miton UK Value Opportunities fund manager Matthew Tillett has been reported as stating that:

“Following a near-death experience during the industry downturn in the 2010s followed by the pandemic, a new management team took over in 2021 and have since improved operations and radically reduced the financial leverage, which we expect to reduce to 2 times Ebitda this year.

This recovery means the financial risk is therefore much reduced and there is a high chance of earnings upgrades over the coming one-to-two years, helped by the replacing of current contracts with new ones at higher day rates for its fleet hire.”

Tillett holds GMS shares in his £202m valued fund.

Broker’s Views

Analyst Daniel Slater, at Zeus Capital, has a 30p valuation on the group’s shares.

In a recent note on the group, issued two weeks ago, he concluded that:

“GMS operates a fleet of 14 liftboats, which it leases to clients primarily in the Middle East but also more widely including in Europe.

The company’s vessels are used for both offshore maintenance and to assist with EPC projects, across oil and gas and wind.

Global upstream underinvestment in the late 2010’s/early 2020’s continues to reverse, including key GMS clients ADNOC, Saudi Aramco and Qatar Energy pursuing new activity programmes.

The Middle East, with its favourable geology, shallow water and extensive oil services availability is very competitive as a global oil and gas province, making it a focus for increased upstream spending, even at moderate oil prices.

This is all contributing to an ongoing tight market for GMS’s liftboats, with utilisation (92% in 2024, from 94% in 2023 and 88% in 2022) and day rates (US$33.1k/day in 2024, from US$30.3k/day in 2023 and US$27.5k/day in 2022) continuing strongly overall.

We forecast this to drive ongoing increases in GMS EBITDA (US$87.5m reported for 2023, US$100.4m for 2024, and US$100108m then guided for 2025 and US$105-115m targeted for 2026), helping pay down debt and drive a transfer of value from debt to equity (underpinned by the asset value of GMS’s fleet).

The company is also now looking to establish dividends and/or buybacks in due course, alongside potentially adding further vessels.

In anticipation of more new contract wins, potential further guidance upgrades, and periodic financial results to highlight all this to the market, we have a positive outlook for the shares and value them at 30p.”

Ashley Kelty, analyst at Panmure Liberum, rates the group’s shares as a Buy with a 32p Target Price, while he states that:

“Demand remains high with the current backlog now standing at $570m. GMS continues to deliver on revenue growth and the outlook remains positive.

We maintain our TP of 32p and reiterate our BUY recommendation.”

In My View

The shares of GMS are destined to rise a great deal higher than the current 18.80p, at which the group is valued at only £212m.

An easy early price objective is 25p, while it is easy to see the shares at 32p in due course.