up 15 percent, page-4

It might be because of Intersuisse report just out.

Neptune Marine Services Limited NMS 12 March 2008
Unique expertise in a high margin growth field gives strong commercial advantage
Recommendation: Strong Buy for rapid growth at low P/E
Investment Rationale
NMS is rapidly building itself into quite a unique global position through its
strategy of acquiring specialist diving services groups and welding them into an
integrated engineering services provider.
NMS has unique technology that enables a dry permanent weld to be
performed in situ under water. Its ‘NEPSYS’ technology has been accredited by
global ship and pipeline certification societies for work on ships and pipelines.
Through a series of acquisitions of small diving groups on low P/Es, NMS now
has businesses through Australia, South East Asia, the US and the North Sea.
It provides subsea engineering services, pipeline engineering, inspection,
commercial diving services, specialist fabrication, hydrographic survey works
and subsea welding. Integration of acquisitions is ongoing, with most principals
retaining shares and management roles. Earn-outs and cross-selling foster a
group focus and rapid sharing of expertise across sectors and customers.
With some 445 people and another 30 soon to join, NMS

While EPS growth will be slowed by share issues and NMS needs to prove its
integration expertise, it has captured a strong commercial advantage in a
specialist area strongly in demand as the pace of subsea oil & gas investment
and existing facility maintenance is growing rapidly. The P/E discounts growth.
Events
We update our 17 January review “Buy for strong upside” at 96.5¢ to draw
attention to the 1H08 result which showed a maiden, if small, profit; continuing
positive news and the price fall to 52.5¢ in the credit-induced market fall.
1. 1H08 showed a maiden NPAT of $845K (1H07 loss $1.14m)
2. Normalised NPAT was $2.2m (ex IFRS adjustments)
3. Revenue was $31.7m (1H07 $0.8m, full year FY07 $15.5m)
4. Delays in the Tri-Surv Geomatics acquisition, settled last August, two Gulf of
Mexico projects impacted by weather and vessel availability on a project for
Apache, held back revenue estimated at $6.7m with estimated $3.15m EBIT.
5. Successful capital raisings of $61m involved 32.0m shares placed last
December, a 32.1m issue in January and an SPP of 2.0m, all at 95¢.
6. The acquisition of North Sea based Ross Deeptech was completed in
January with a $25.1m payment.
7. Summing up, MD Christian Lange said “… we remain very much on course
to delivering our anticipated EPS of 6-7c/share for the full year 2008.”
8. NMS has won a major contract for its NEPSYS welding technology in the
Gulf of Thailand. It is also to acquire a dynamically positioned offshore
construction support vessel. Timing of delivery of this 55m vessel will match
that of NMS’ first (of three) work class ROV (remotely operated vehicles) and
the acquisition of Perth-based Sea Struct P/L.
9. Escrow has ended on 8m shares, leaving 18m in escrow of 282m on issue.
Recommendation Impact
NMS has specialist expertise to work on the massive amount of ageing offshore
infrastructure worldwide and the complex projects underway. It is a high margin
business with significant barriers to entry. Progress has been rapid and ahead
of plan. The results and guidance endorse our FY08 estimate. Strong BUY.