dare i say a sp of $1, page-9

from todays intersuisse report

http://www.intersuisse.com.au/files/Morning%20Notes.pdf
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Neptune Marine Services Limited NMS
Tuesday 15 September 2009

The track record builds—acquisitions are integrated, growth is dynamic and profitable

Recommendation: Buy – becoming a global player in an expanding field

Investment Rationale
NMS is one of Australia’s leading providers of integrated and underwater
engineering solutions to the oil & gas, marine and renewable energy sector. It
has over 600 people in Australia, the UK, USA and Asia. MD Christian Lange
has long experience in the field and has rapidly built a unique position offshore
Australia and elsewhere by acquiring specialist diving and offshore services
teams to create an integrated group matching the demanding industry needs.
NMS has unique technology that enables a dry permanent weld to be made in
situ under water, accredited by global ship and pipeline certification societies.
After acquisitions on low P/Es, principals retain roles, shares and earn-outs.
Scale, broad expertise, shared services, and a global market presence add
opportunities and customers. NMS has gained a commercial advantage in a
specialist area much in demand as the pace of subsea oil & gas investment
and facility maintenance will continue to grow at relatively high rates.


Event
􀂃 NMS continued its run of record results through FY09, winning over
$100m of new contracts, adding a 70m Support Vessel and three ROVs
(Remotely Operated Vehicles) and completing acquisitions of Access
Management (Australia & Singapore) and Subsea Engineering Services
(UK). Its NEPSYS underwater welding technology was introduced into the
North Sea and NMS surveyed an 860km subsea gas pipeline route for the
Ichtys Gas Field offshore WA.
􀂃 FY09 profit, normalized by excluding share-related payments on
acquisitions, was $25.1m, up 130% and ahead of our March estimate of
$23.0m based on guidance. Statutory NPAT was $21m, ahead of $19m
expected. Revenue rose 120% from $87m to $189m, with EBITDA up
185% from $15.3m to $43.6m.
􀂃 Normalised EPS rose 89% from 4.4¢ to 8.3¢, as issues diluted capital. On
a fully diluted basis, EPS was up 76% from 4.3¢ to 7.6¢.
􀂃 No dividend was paid, but we include a notional 0.75¢ for FY10 to show
prospects, though they may be deferred to FY11. Importantly, cash was
up to $24.3m from $18.2m. With debt of $37.1m, net debt at year-end was
7% of equity with interest covered 10 times by EBIT. These figures
exclude ~$40m of the $53m capital raising in June, completed in July.
􀂃 Capex totaled $49m, acquisitions $12m plus $10m deferred payment.
􀂃 FY09 showed the planned diversity of revenues: A 76% Australia-based
FY08 majority slid to 44% as Asia contributed 21%, US 19% and UK 16%.
􀂃 Fulltime staff rose by 34% as the two new businesses were integrated.

Impact
􀂃 NMS sees a ‘robust pipeline of tendering opportunities, focused on oil &
gas. Organic and acquisition growth and revenue should be evenly
balanced; NMS will develop its capabilities in the US and UK markets
while addressing numerous opportunities for growth in South East Asia.
The LNG developments in Australia should assist, as also NMS’s survey
and deepwater capabilities. Brazil and Mid-East prospects are emerging.
􀂃 The 1 September proposal to acquire Aberdeen-based Submersible
Technology Services at ~AD32m should prove EPS positive at once, paid
~93% in cash with $25m+ revenues, strong management and proven
track record over 30 years. A niche designer, assembler and contractor of
ROVs, it operates 11, with a very strong order book. A typical NMS deal!

Impact
NMS has already built strong relations with diverse substantial clients and its
presence across key offshore oil & gas centres globally should continue to
build its reputation and exposure to major players. Fundamentals remain
attractive and NMS appears set to prosper in a long-term growth field. Buy.