Gulf Marine Services – the shares of this energy sector services provider are about to lift-off, now 15.45p, going to 20p then possibly 30p later this year

23.01.2025

The brake could soon be lifted on the shares of Gulf Marine Services (LON:GMS).

The £160m capitalised Abu Dhabi-based group is a world-leading provider of advanced self-propelled self-elevating support vessels, with its fleet of 13 SESV’s serving its offshore energy sector customers around the Middle East, South East Asia, West Africa, North America, the Gulf of Mexico, and in Europe.

Some years ago, a competitor built up a near-29% stake in this offshore energy sector services provider, with a view to merging or even taking it over.

But discussions ended with an amicable solution without being detrimental to the group’s share price.

Seafox International, which is another leading global offshore jack-up company, providing services to support the oil and gas and renewable industry, agreed not to proceed with its offer, while appointing a Director onto the GMS board.

It also agreed not to shake the share price as it reduced its equity position.

It even participated in the June 2021 capital raise as it protected its holding.

Last June

Seafox placed a certain number of its shares, some 51.1m shares at 17p each in June last year, which represented 4.8% of the GMS stock.

That left it with 23.7%, around 253.7m shares in its rival.

Last September

Last September Seafox declared that it was going to distribute 150m GMS shares to its own shareholders, in the form of an ‘in specie’ dividend, retaining 103.7m shares, some 9.69%.

Incredibly Wealthy Holder Increases Stake

On Tuesday, 7th January, I reported that the ‘man who bought London’, who is none other than the former Prime Minister of Qatar, Hamad bin Jassim Al Thani, had increased his stake in GMS by almost 40% to 5.05% of the GMS stock.

HBJ, as he is known, has incredible connections and interests, including owning, it is said, a 3% stake in Deutsche Bank.

He was obviously a holder, through one of his companies, in Seafox and received the shares as part of the share distribution of some 58.8m shares, 5.4% of GMS, to its shareholders.

Latest Position

At the last count, as per 10th January, Seafox International is now down to 67.78m shares in GMS, 6.33% of the equity.

Certain media reports have commented previously on the Seafox position as being a massive overhang of stock, thereby holding back its price progress.

For my part, I take the view that this whole exercise has been handled superbly and with minimum disruption and that the supposed brakes are certainly coming off.

So where now?

As per an announcement on Monday 6th January, the Gulf Marine debt was refinanced as it looks to lower its cost of borrowing and enabling greater flexibility on the group’s capital allocation.

On Tuesday of this week, the group announced a 171-day extension to an existing contract for one of its large-class vessels operating in the Gulf Cooperation Council countries.

Following the award of that contract extension, the backlog stood at $483m of future business.

Management Comment

Executive Chairman 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."

Analyst Views

Daniel Slater, at Zeus Capital, has a very positive 30p valuation on the shares, while his is looking for the end-December 2024 year to report almost double adjusted pre-tax profits at $43.5m ($24.2m) on the back of sales of $168.4m ($151.6m), lifting earnings some 74% to 3.3c (1.9c) per share.

For the current year he goes for $176.4m revenues, $55.0m profits and 4.3c per share in earnings.

His 2026 estimates are for $181.9m sales, $62.8m profits and 4.9c per share in earnings.

Analysts Craig Howie and Nick Orgill, at Greenwood Capital Partners, have a Buy note out on the group’s shares, with a 29p Target Price.

They see a considerable amount of value in GMS shares and are impressed by the group’s free cash generation.

In My View

We will probably have one or two new announcements from the company before it announces its 2024 Final Results in early April.

I now see the shares, currently 15.45p, moving gently ahead especially as those ‘overhang’ rumours are dismissed.

The analyst Target Prices have strong merit.