Medserv has started FY18 with a positive operating backdrop. Last week, ENI announced a lean gas discovery in Block 6 Offshore Cyprus. Meanwhile, the company has reported further success with its strategy to expand into new territories, with a three-year contract. We believe that building operational visibility in Cyprus while expanding internationally supports the potential for substantial revenue growth for 2018-20.
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Medserv |
Discovering and delivering |
Newsflow |
Industrial support services |
12 February 2018 |
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Medserv is a research client of Edison Investment Research Limited |
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Medserv has started FY18 with a positive operating backdrop. Last week, ENI announced a lean gas discovery in Block 6 Offshore Cyprus. Meanwhile, the company has reported further success with its strategy to expand into new territories, with a three-year contract. We believe that building operational visibility in Cyprus while expanding internationally supports the potential for substantial revenue growth for 2018-20.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
42.7 |
6.1 |
9.7 |
4.3 |
12.0 |
3.7 |
12/16 |
32.8 |
(1.3) |
(2.1) |
0.0 |
N/A |
N/A |
12/17e |
28.2 |
(2.8) |
(6.4) |
0.0 |
N/A |
N/A |
12/18e |
42.3 |
5.8 |
9.5 |
3.8 |
12.2 |
3.3 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and retention contracts, and exceptional items.
ENI is the leading offshore IOC operating in the Mediterranean and Medserv supports its drilling operations in Cyprus from its onshore bases in Larnaca and Limassol. The latest lean gas discovery announced by ENI offshore Cyprus is believed to be ‘Zohr-like’ in nature. Zohr, offshore Egypt, is the largest gas field in the Mediterranean currently. ENI has a 50% participation in Block 6 where the new find has been made and Medserv’s ILSS business recommenced support for the drilling programme in Q417. The new find should provide an extended drilling programme, providing greater visibility and improved returns from Cyprus.
Meanwhile, we have made it clear that Medserv’s strategy is to develop its operations into new territories. The company announced on 23 January that it has secured business, via a competitive tender, in “a market, considered by the industry to be the big new energy source on Europe’s doorstep”. The three-year c €10m contract to provide integrated logistics support services for the production phase of offshore has an option to extend. Due to commercial considerations, the name of the IOC has not been disclosed at this time.
These two announcements are supportive to Medserv’s operations, underpinning the potential for substantial revenue growth going forward and our fair value of €1.64 per share. Preliminary results are scheduled for 27 April 2018.
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Disclaimer
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Disclaimer
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7digital Group’s FY17 trading update shows that while revenues were short of our forecasts, at the EBITDA level it is well ahead of our expectations, with the group’s restructuring programme delivering ahead of plan. We update our FY17 numbers and incorporate the recent fund-raise, but otherwise leave our forecasts unchanged.