Medserv: Stabilising The Platform
Edison | May 25, 2017 07:19AM ET
Medserv PLC (MT:MDS) issued an interim report on 22 May that indicates a stabilisation of the outlook for the group. METS appears to be trading strongly and while the onshore base support activities are still depressed, these should progressively recover in the second half. The reaction to the challenged FY16 results and more tempered outlook, while unsurprising, leaves the shares looking increasingly attractive against our fair value estimate of €1.83. There is scope for this discount to reduce as trading improves in H217. A FY18 P/E of 13.0x does not appear overly demanding given the potential for continued recovery and growth thereafter.
The integrated logistics support services (ILSS - onshore base support services) segment is expected to benefit from the improved profitability of the IOCs and more stable oil market conditions. Drilling activity has yet to improve but should accelerate in key territories through H217, providing a foundation for a stronger FY18. Malta is preparing for the resumption in drilling offshore Libya with equipment expected to arrive in the next few weeks. Cyprus is preparing its new Limassol base as well as the storage and service facility in Larnaca, with drilling expected to resume in Q4. Portugal is also expected to commence drilling late in the year and the customer’s licence was recently extended to early 2019. Business development is continuing in Trinidad and the newly registered Medserv Egypt has signed a MoU for a base to support both offshore and onshore activities.
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