Gulf Marine Services – yesterday’s Q1 Trading Update shows just how underrated this group’s shares are at 17.5p, brokers valuations of up to 32p. Cheap as chips!

08.05.2025

Mark Watson-Mitchell

Yesterday the Abu Dhabi-based Gulf Marine Services (LON:GMS) reported that demand for its vessels has remained strong in the group’s first Quarter to end-March.

The company is a leading provider of advanced self-propelled, self-elevating support vessels serving the offshore oil, gas and renewables industries.

The fleet of 14 vessels serves the offshore energy industries from its offices in the United Arab Emirates, Saudi Arabia, and Qatar.

Its assets 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.

The Q1 Trading Update

The Q1 Overview showed revenues up 14% at $42.3m ($37.1m), while its adjusted EBITDA was 21% better at $25.6m ($21.2m).

Its net debt had been massively reduced in the first quarter to $187.4m ($256.5m), some 27% lower.

The group’s vessel utilisation was 3% better at 89% (86%), while its day rates were 8% higher at $34,200 ($31,800), which was strengthened by the group’s order backlog at the end of March at $570m ($459m), some 24% higher.

Management Comment

CFO Alex Aclimandos stated that:

"We are pleased to report that GMS has maintained strong momentum into 2025, building on the operational and financial achievements of last year.

Looking ahead, we remain committed to providing a resilient capital structure, proactively managing risks and advancing our shareholder rewards program, all while positioning the Group to capitalise on market opportunities.

We are confident in our ability to deliver sustainable, profitable growth as we move forward into the remainder of the year."

 Chairman Mansour Al Alami also commented that:

"As we navigate the evolving complexities of our industry, we remain firmly committed to executing a resilient and sustainable strategy that safeguards long-term financial performance and maximizes sustainable value for our shareholders.

I am delighted the performance in the first quarter of this year is a strong contribution to this objective."

Analyst Views

At Zeus Capital, its analyst Daniel Slater noted the group’s good progress in its Q1, while having a 30p a share valuation on its equity.

For the current year to end-December he is looking for $184.3m sales, $56.7m profits, and 4.4c per share in earnings.

He has increased his estimates for the next year, to show $206.5m revenues, with $69.8m profits and 5.5c earnings.

Impressively as the group deleverages Slater expects to see net debt by the end of next year having dropped to just $45.1m, compared to the $201.2m figure at the end of 2024.

Analyst Ashley Kelty, at Panmure Liberum, has a Buy rating on the group’s shares setting a 32p Target Price.

He considers that GMS continues to deliver on revenue growth and that the outlook remains positive.

Kelty comments that the ‘warrants overhang’ has gone, noting that GMS said that a further 38.4m warrants were exercised in the period, resulting in the issuance of 60.0m shares.

That leaves 15m warrants outstanding, which if exercised, would add another 23.5m shares, having an expiry at the end of June.

With only a small proportion of the warrants left outstanding the oft-claimed ‘overhang’ is arguably now eliminated.

“We now see the opportunity for the shares to be re-rated to reflect the underlying value in the business, without the perceived threat of dilution.

With no clear evidence of sustained selling, we believe warrant holders have exercised the warrants and are now happy to wait on further share price appreciation.”

Kelty’s estimates show $177.0m ($167.0m) sales this year, with $52.8m ($34.8m) pre-tax profits, with 4c per share earnings.

For next year he goes for $185.0m sales, with $64.4m profits and 5c earnings.

In the 2027 year, Kelty reckons the group could report $194.0m sales and $76.5m profits with 6c per share in earnings.

In My View

These shares are as cheap as chips.

With the potentially dilutive overhang being largely cleared I can now only really anticipate an upward journey for its equity.

As Panmure Liberum’s analyst suggests, there is now an 80% plus upside for the group’s shares, currently 17.5p.