article smh age june 18, page-3

Neptune Marine

This is another offshore oil and gas services company that has benefited from expanding into international markets. Having acquired and integrated eight new businesses over an 18-month period for a total consideration of nearly $100 million, Neptune's emergence from an unprofitable minnow to a serious competitor in the offshore oil and gas services market has been impressive.

Neptune's size is better measured by the range of services it can offer than by the market capitalisation figures that a company like WorleyParsons boasts. Furthermore, Neptune should be considered a medium to long-term investment proposition, as this year's net profit of about $10 million should grow substantially in 2008-09.

Neptune's earnings per share are expected to rise from 3.3? in 2007-08 to 8? in 2008-09, according to consensus forecasts. This represents a P/E ratio of about six relative to 2008-09 estimates, suggesting the market has not factored in the company's growth profile.

Revenue from two contracts involving Neptune's higher margin businesses was unexpectedly deferred, resulting in a transfer of some of the anticipated 2007-08 profits to the 2008-09 financial year. While this may have contributed to a downturn in Neptune's share price it should be remembered that the company's substantial maiden profit will represent a strong turnaround from the previous year's loss of $6.7 million.

Neptune's suite of sub-sea services, including its patented underwater welding technology, is the main point of difference between the company and its competitors. It is this "cradle to grave" offering that should continue to attract new customers and strengthen existing relationships