The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
I'm not one to post often on these LSE boards, but time is right for one now.
It's been a beautiful rise. Really, just beautiful. I've been in GMS since 2016, first buying at 49.5p. Have averaged down numerous times since, and now sitting on over a 3x money multiple. I was VERY uncertain and suspicious during the depth's of GMS troubles several years back. But I held my nerve and stayed focus on the fundamentals and took comfort that no matter how I cut it at the time, I couldn't see how Seafox (ManCap)/Mazrui/Horizon would have been able to legally get away with snapping up the assets or company on the cheap and screw over the other investors. Alas, I think GMS' investors have proved themselves bona fide here. This has been a strong conviction holding for me for some time. I didn't think we'd get to 24-25p so soon. In another 2-3 years, with net debt down to negligible levels, EBITDA north of $120m, dividends being paid and at an 8x EV/EBITDA the equity should be able to get up to 60-80p. I also wouldn't be surprised if GMS eventually gets combined with Seafox (...on attractive terms for all parties).
@4C - come back! I think he may have long since moved on....
All the best everyone, and long may GMS shine!
I did suspect a positive RNS was imminent. Trading volume has spiked massively higher (in relative terms) over the last couple of weeks.
This is a very positive development and further de-risks the story for me. Mainstream institutions don't want to touch it partly I think because it falls over on their stringent DTR/Governance rules.
As to valuation, it's absurdly undervalued if you believe in the continued deleveraging. The transfer from debt to equity value over the coming years (2024-2027) is eye watering. A re-rating to 8.0x EV/EBITDA (entirely reasonable and consistent with historical valuations), Net Debt down to $200m and EBITDA of $95m easily takes you to a share price of c. 40 pence. And one can easily see a scenario where they are debt free by 2027 - so plug that in to your spread sheet and you're well over 50p.
WOW! I sold out of this late last year, have not followed much since. Activist shareholders are supposed to in theory have a grand plan for maximising value and re-rating the equity. The current team in place seem to have floundered and not fully realised what they have taken on. I suspect their plan looked rosier on spread sheets!
$620m immediate dividend under the NewMed deal and a stake in a significant world-class gas project. Under the plan now, you get only $450m, and "maybe" an additional $100m later in the year if various stars align. Oh, and a token $25m buy-back. And they double down on the rubbish asset that is Egypt (which was a horrible deal by the old team).
Shareholders would have been MUCH better off under the NewMed deal, heck even the TLW merger I think was better.
Glad I exited around the 250p mark. Only ever bought into this as a special situation play. A damp squib.
@ Amtech - since when does any company ever pay off all outstanding debt in the run-up to the facility maturities?? That never happens. What matters is the leverage ratio. Once they get down to 2-3x leverage it will be seen as a "normal capital structure" and they will re-finance the facilities which will be a customary, no-drama event and process. And they will/should be around that leverage ratio in the next 18-24 months.
I thought the last RNS / trading update was fairly positive. The brevity was impressive, although not surprising. Always frustrating when the fundamentals and turn around story are great but the share is persistently held back by never-ending short-term headaches.
It's a strange one. I don't know where the "brunette" comes from. No such person seems to exist. I suspect this is the same Ivan Lindsay who appears to be a wealthy russian art dealer in London, ex-Britsh army, ex-eton, etc.
https://www.russianartdealer.com/about-ivan-lindsay/
Yeah, @4C, doesn't look like the 3% was picked up in one shot, just crossed that threshold on the 27th Oct which can be seen in the volume spike around then.
Ah, yes, my mistake, no PIK interest then I guess since leverage is already sub 5.0x. For some reason I thought I read somewhere it had to be below 4.0x to avoid incurring PIK. Will double check that myself in due course.
@4C: "They could have refinanced end of this year and avoided the PIK+dilution" ....I don't think they'll be in a position to refinance until they've got leverage down well into the 3x's.
@ 4C: "Not sure of taking private when 2 investors control 55% of the votes, with each one holding atleast 25% - if there ever was a deal to be done,should have happened already?Why wait to get diluted by the banks to buy/sell" Agree - if SEAFOX/Man Capital/Mazroui wanted to take 100% I struggle to see why they havent already. They essentially already have control as it is with 55%....and which they managed to obtain at quite an attractive price. Going for the additional 45% is not likely to be seen by them as an efficient use of capital. Therefore, my medium/long-term fear of GMS being taken private, and therefore game over on this name, is a comfortably low risk.
@4C: ".still looks like no takers for this in public or private domain & stocks in the energy sector are up significantly this year" I don't really mind if the share price languishes for some time. It will re-rate with time. The turnaround story is fundamentally very robust. I am in this for the future dividend yield on cost. A 2-3p divi by 2025/2026/2027 when debt is negligible and EBITDA is around USD130m will be very juicy. We're talking a 7-10x capital gain and a dividend yield on cost of north of 30% per annum (based on my in-price). (Assumes leverage < 1.0x and EV/EBITDA conservatively on 7.0x).
Well, it seems like they'll just issue some warrants to the banks and incur PIK interest for a few months into 2023 until leverage is sub 4.0x. Then, by around 2024 when leverage gets to around 3.0x they'll refinance. All legacy contracts more or less finished by then, new contracts are on substantially better day rates, utilisation expected to remain strong.....so by 2025/2026 they'll probably have negligible debt and start paying a small dividend. That is of course if they're not taken private by then.
Why would they vote to default? Next week's resolution is more just a formality - gives only the authority to issue new shares. Whether or not they will issue new shares they are quite clear no decision has been made and is more likely to be warrants. (that is....if they are to be believed)
On my numbers - they should be done with the full $300m buyback by end of today. Wonder if they'll expand again by yet another $100m, and just keep doing that over and over for as long as they are rolling in cash and share price remains cheap
It seems ADNOC Logistics & Services has acquired Zakher Marine, adding a bunch of self propelled jack-up barges to its fleet. ADNOC is a big client of GMS. Hopefully the deal does not mean materially less demand for GMS' vessels.
Those complaining about the terms of this deal....it's an all-share merger, not a cash offer. You still retain full exposure to CNE post-completion, just via a different entity. The CNE value gap will close and manifest in the form of a higher TLW share price. You realise on completion the TLW share price should be trading north of 80p.... even after the additional issuance of TLW shares and assuming the exact same trading multiples (EV/2P, EV/2P+2C) as TLW currently trades on today. If anything, you should have a "multiple expansion" simply due to the de-risked nature of the new entity. 80p post-completion works out at a CNE price of 300p in old CNE money. It's a beautiful deal for both companies.
If this were a cash offer at c. 210p then yeah, we'd all have something to moan about.
https://www.gov.uk/government/publications/cost-of-living-support/energy-profits-levy-technical-note
An ‘allowance’ will be generated on investment expenditure (capital expenditure and some operating and leasing expenditure) at 80% which can immediately be used to reduce profits subject to the levy
...TO REDUCE PROFITS SUBJECT TO THE LEVY.....this from the technical note published yesterday. This supports my view of the tax calculation. Again, I hope I'm wrong.
Soder / laidback....I very much hope I'm wrong. I very much hope Jeffries, Morgan Stanley, etc are correct. But I'll believe it when I see their reports with my own set of eyeballs. By all means, post the evidence, links, screenshots, etc of their reports.
Soder.,....."You do not deduct the capex from your earnings and run a tax rate off the balance!!!!"
Oh yes, yes, yes you do. In this instance , they are allowing the 80% allowance in year 1. It's just super-accelerated depreciation. And of course as anyone with any accounting knowledge knows, you deduct depreciation (which is just a portion of historical capex) from earnings and tax the balance.