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Gulf Marine emerges from the trough

The UAE-based contractor has endured a torrid time in its principal markets, though the worst might be over
March 28, 2017

That the share price of Gulf Marine Services (GMS) wasn't marked down after the oil services company detailed a 40 per cent fall in adjusted net profits to $50.7m (£40.2m) indicates a certain resignation on the part of its investors. But there's enough in these full-year figures to suggest that the oil service company's markets have troughed and that 2017 will give way to a recovery, albeit a patchy one.

IC TIP: Buy at 69p

Upstream budgets have yet to retrace significantly, despite Brent crude nestling in the $48-$56 channel for much of the second half of 2016. But that range should prove sufficient to generate work for Gulf's modern fleet of 15 self-propelled, self-elevating support vessels. More so, as the UAE-based contractor's regional clients are tapped into a high-margin part of the oil and gas industry.

Indeed, the company has seen activity levels pick up in the region, primarily driven by Saudi Aramco, and management is confident that most of the work lost due to cancellations or non-renewals in 2016 will be re-tendered in 2017. But a better second half didn't stop the fleet utilisation rate dropping from 98 per cent to 70 per cent year on year.

Prior to these figures, Numis had forecast cash profits of $97.1m and EPS of 10.6¢ for the year ending December 2017 (from $107m and 14.5¢ previously).

GULF MARINE SERVICES (GMS)
ORD PRICE:69pMARKET VALUE:£241m
TOUCH:68.5-70p12-MONTH HIGH:75pLOW: 29.5p
DIVIDEND YIELD:2.3%PE RATIO:10
NET ASSET VALUE:127¢*NET DEBT:81%

Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
2012*14351.348.1na
2013*18473.368.2na
201419780.422.11.47
201522077.121.41.61
201617930.88.41.61
% change-18-60-61 

Ex-div: 17 Apr

Payment: 19 May

* Pre-IPO figures

£1=$1.26