- 2023 cash profit up 22 per cent to $87.5mn
- 2024 cash profit guidance of $92-100mn
- Utilisation rates and day rates continue to rise
- Net debt slashed
Gulf Marine Services (GMS:22.1p), an operator of advanced self-propelled self-elevating support vessels in the Middle East, delivered results slightly ahead of upgraded guidance, and that’s after raising expectations multiple times in the past 12 months.
Full-year cash profit surged 22 per cent to $87.5mn on 14 per cent higher revenue of $151mn, buoyed by activity programmes for key clients (ADNOC, Saudi Aramco and Qatar Energy) which have been boosting upstream spend. The revenue growth reflects higher utilisation rates (up from 88 to 94 per cent) and day rates (up 10 per cent to $30,300) for GMS’s fleet.
Expect both metrics to improve as GMS is targeting 95 per cent utilisation rate this year, of which 83 per cent is secured, and average secured day rates are 10 per cent higher than 2023 levels. The bumper cash generation enabled GMS to pay down $48mn borrowings and Zeus Capital predicts a further reduction in net debt to $212mn by the year-end, the implication being a $55mn transfer of value from debt to equity holders to boost book value from 25.6p to 29p. Lowering debt is positive for a refinancing of the debt on better terms, and potentially dividends, too.
The share price has risen 136 per cent since I initiated coverage (Alpha Research: ‘The niche oil services provider on a recovery uptrend’, 18 September 2023), but GMS is still only rated on 5.5 times 2024 cash profit estimates to enterprise valuation. My 25p target price is conservative. Buy.
