Yeah baggy it is."Neptune Marine (NMS) $1.02 CRITERION is quite...

Yeah baggy it is.

"Neptune Marine (NMS) $1.02

CRITERION is quite proud of several of his past calls, among them Neptune Marine Services when it was 30 cents a year ago. News that the underwater welding specialist has won an $8million contract with Apache Energy on the North West Shelf sent him back to the files, and to revisit a hold recommendation.

Patersons Securities analyst David Gibson, who has Neptune as a speculative buy, says: "We regard the contract win as a milestone for the company, in that it demonstrates NMS's ability to win subsea work with clients on an integrated basis."

The contract, at $8 million, will be close to 10 per cent of Neptune's revenue for the 2008 financial year, according to Patersons.

Given a margin of 25 per cent to 30 per cent, it could add more than $2 million in earnings before interest and tax, and form about 10 per cent of the total for the year.

Patersons knows Neptune, having underwritten a $61 million placement last December, a $34million placement and rights issue in April 2007 and a $17million capital raising in October 2006. The first raising was at 20c, which testifies to the remarkable growth of Neptune.

It has unique welding technology that saves oil companies a fortune. Instead of decommissioning a drilling platform and carting it off for repairs -- a six-month job at least -- the Neptune system allows repairs in situ and cuts production losses.

Under Christian Lange, the company has been acquiring left, right and centre. Between December 2006 and August 2007 Neptune bought three diving services businesses, two subsea engineering companies and one company that specialises in underwater surveying.

Among the purchases is Perth-based Sea-Struct, which makes and installs special concrete blocks to hold down pipelines in rough water, and Aberdeen-based Ross Deeptech. The latter acquisition, for $25 million, underpins plans to grow in the North Sea marine services market.

Neptune also has diving, maintenance and services operations in the US via its US Underwater Services business. Lange is a 16-year veteran of global oilfield services group Schlumberger and it looks as if he wants to build Neptune into something similar, but Australian-based.

Rising oil prices have been useful, as oil companies are prepared to pay to extend the lives of wells, platforms and equipment.

The Sea-Struct acquisition is expected to be immediately earnings per share accretive, and could broaden Neptune's international presence to include Singapore, Indonesia and the Middle East.

Neptune's immediate focus is to grow its already strong presence in the US.

In October, Neptune's US-based Underwater Services business signed an agreement with the Lower Colorado River Authority to provide diving services for all LCRA projects in the Texas Lakes.

Patersons has a price target of $1.26 on Neptune Marine, but given the state of the market and a big run to date, Criterion will stay with a hold. "