Mark Watson-Mitchell looks at Gulf Marine Services, Buy @ 15.80p

18.12.2024

Gulf Marine Services (LON:GMS) – Shares are significantly undervalued 

Chairman Mansour Al Alami stated that: 

"Strong demand for our vessels continues to drive solid results.  

Both forecasted utilisation rates and contracted daily charter rates will enable us to achieve the above guidance." 

Yesterday the UAE-based provider of self-propelled, self-elevating support vessels for the offshore energy sector, Gulf Marine Systems, upped its guidance to the market for 2024 and 2025. 

It stated that the company now anticipates its 2024 adjusted EBITDA guidance to be at the upper end of previous guidance of $98-100m for 2024. 

For 2025, it expects its adjusted EBITDA to reach $100-108m, an increase from the previously forecasted 2025 EBITDA guidance of $92-100m. 

CFO Alex Aclimandos stated that: 

"We are thrilled to share a further upward revision in our guidance.

The growth in EBITDA, combined with reduced finance costs, will further support GMS's ability to deliver value to clients and investors, as it transitions into a more agile organisation." 

The group’s fleet of 13 SESVs is amongst the youngest in the industry 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 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. 

Yesterday analyst Daniel Slater, at Zeus Capital, upgraded his estimates, for the current year to the end of this month, to $168.4m in sales, to $43.6m adjusted pre-tax profits and 3.3c per share in earnings. 

For next year he sees $176.4m sales, $55.0m profits and 4.3c earnings. 

His value for the GMS shares is now up 30p, highlighting his positive outlook for the group. 

In a Buy note yesterday analysts Andy Smith and Ashley Kelty, at Panmure Liberum, also have a 30p valuation out on the group’s shares. 

They look for $166.0m sales in 2024, $37.5m profits and 3.0c per share in earnings.

Next year could see $175.0m sales, $55.2m profits and earnings of 4.0c per share. 

Further out into 2026 the analysts look for $183.0m in sales, $67.1m profits and 5.0c earnings. 

Craig Howie, at Greenwood Capital Partners, also has a Buy rating on the group’s shares, but with a 29p Price Objective. 

He sees group revenues rising from $151.6m in 2023, to $168.4m this year, $175.3m next year and $180.5m in 2026. 

In the same period span his predictions are that earnings rise from 1.9c, to 3.0c then up to 3.7c next year and 4.4c in 2026. 

From where I stand, I believe that this group’s shares, which hit 24.60p in April this year, are now significantly undervalued at 15.80p. 

(Profile 30.11.23 @ 13p set a Target Price of 16p*) 

(Profile 22.01.24 @ 15.95p set a Target Price of 19.50p*)