11.02.2025
Yesterday the shares of Gulf Marine Services (LON:GMS), one of the UK Investor Shares For 2025, rose impressively to 19.64p before closing at 19.30p, which is well above the 15.85p at which it was featured at the turn of the year.
A couple of weeks later readers could have purchased GMS stock down at 14.70p, as the market was hit by US tech sector hassles.
However, yesterday there was heavy trading in the group’s shares, with over 7m dealt, more than double the recently increased daily average volume.
Recent Strength
The recent strength of the energy sector services business has followed various items of positive corporate news – and that trend is very likely to continue well into 2025.
The £202m capitalised group advised the market just before last Christmas that its 2024 and 2025 results should be better than expectations.
The first week of the year saw the group declare that it had successfully completed its debt refinancing on lower borrowing costs, giving it greater flexibility on its capital allocation.
Three weeks into the year it announced an extension of contract for one of its larger vessels, taking its order backlog up to $483m.
At which point CEO Mansour Al Alami stated that:
"This contract extension reflects the continued demand for our vessels, the overall strength of the market and the ongoing confidence of our partners in the service we provide."
The Business
Established in Abu Dhabi way back in 1977, the company has subsequently become a world-leading provider of advanced self-propelled self-elevating support vessels.
Its fleet of 13 vessels serves the offshore energy industries from its offices in the United Arab Emirates, Saudi Arabia, and Qatar, they are capable of serving clients' requirements across the globe, including those in the Middle East, South East Asia, West Africa, North America, the Gulf of Mexico, and Europe.
Over the last year GMS’s major shareholder, Seafox International, has reduced its stake from just under 29% to 4.98%, following the gradual distribution of some of its
GMS shares as a ‘dividend in specie’ to its own shareholders – this added a new group of investors to the register.
Seafox had originally planned on taking over its GMS competitor but eventually came to amicable terms of support for the group.
The subsequent dilution of its holding has been exemplary in its steady process.
Various winds are now blowing in the right direction for GMS and its share price is reacting favourably in recognition of the better news.
Analyst Views
Yesterday Panmure Liberum analysts Andy Smith and Ashley Kelty put out a Buy note with a 30p a share Target Price.
They stated that:
“The narrative has evolved such that GMS, having regained the trust of the banks can consider payment of a dividend, share buybacks or possible expansion in the fleet by way of buying or leasing further vessels.
In effect, its recovery story has moved on which has yet to be fully realised in the share price.”
The emergence of new shareholders in the GMS equity should not detract from its positive trading outlook.
For the year to the end of December 2024, they estimate that the group could see $166.0m ($152.0m) sales, and pre-tax profits of $37.5m ($12.1m).
This year could see $175.0m revenues and $55.2m profits.
For the 2026 year, the analysts go for $183.0m sales and $67.1m of profits.
In My View
The shares, which have eased back fractionally this morning to just 19p offer massive upside in price.
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