An interesting company to follow.
The broker Arden, has initiated coverage of Gulf Marine Services (LON:GMS) and released a report out today.
"Gulf Marine Services owns and operates a fleet of 13 lift boats, primarily in the Middle East. These are used for offshore oil and gas maintenance and construction work, as well as offshore wind activities. The company’s market is increasingly tightening as its customers ramp up activity, putting upward pressure on GMS vessel utilisation and day rates. In anticipation of higher cash flows and reductions in net debt, we initiate coverage with a Buy recommendation and 20p target."
Quality 53
Value 98
Momentum 89
Rank 95
Share price 6p TP of 12p with varies valuations ranging from 12p-28p
Market Cap £60.88m
EV £372.22m
Revenues $135.3m (2022E)
EBITDA $78.9m (2022E)
APAT $32.8m (2022E)
PE 2.7 (2022E)
Cash of $8.3m (2021) and $4.0m (2022E)
Net debt of $371.3m (2021) and $314.5m (2022E)
The obvious caveat here is the high debt of $371.3m
"Existing debt position as of the end of 2021, GMS held US$379.5m of gross debt (US$371.3m of net debt), putting the company on net debt/EBITDA of 5.8x. While this represents a significant liability position for the company, there are also several additional elements due to the restructuring carried out in 2021. First, under the existing debt terms GMS has the option to elect to raise another US$50m of equity before the end of 2022 (the original total was US$75m, and £20m was raised at 3p in 2021). Second, if GMS elects not to raise the balance of the equity, then the company is obliged to issue warrants over 132m shares at a price of 6.0p per share (11.5% of existing issued shares). These warrants vest immediately and then have a two-year life. Third, under the existing debt terms GMS can incur additional interest after the end of 2022 depending on the net debt/EBITDA level. If net debt/EBITDA is above 3.0x, the cash margin (above LIBOR) increases on a progressive ratchet from its base 3.0% to as high as 5.0%. In addition, if net debt/EBITDA is over 4.0x, non-cash PIK interest at a rate of between 2.5% and 5.0% also begins to be incurred. The additional interest only applies while net debt/EBITDA remains above the 3.0x and 4.0x levels, and this is calculated quarterly. The size of GMS’s debt position and the various conditions attached…
