Marine engineering group Mermaid Marine (MRM) suffered its worst sell off in over a decade after revealing disappointing first-half earnings issuing a warning that full-year earnings would fall far short of consensus expectations.
The stock sank 13.1% to a 13-month low of $3.06 in early trade after management said that a number of key projects and drilling operations have been delayed.
What was also a shock to the system is the group’s prediction that 2013-14 net profit would be flat on the previous year with a little over 60% of earnings weighted to the second half of the financial year.
Flat should be the “new up” for the sector with some resource contractors galvanising investor support when they guided for stable full year earnings, but not in the case of Mermaid Marine.
Analysts polled on Bloomberg were tipping a 10% increase in the group’s bottom line to $66.2 million as Mermaid is seen to be in a much stronger position than other contractors given its exposure to the still growing oil & gas sector and because of its strategically located supply base that’s close to the energy rich North West Shelf off the Western Australian coast.
Today’s fall puts the stock on a 2013-14 price-earnings multiple of 11.4 times. Not ideal but not overly expensive as well. As long as analysts have confidence that demand for Mermaid’s vessels and supply base services will pick up in 2014-15, the stock should still find some support.
The only ones that might be seeing the brighter side of the profit warning are the private equity groups trying to do a takeover of fellow marine services firm Miclyn Express Offshore (MIO).
The takeover offer is pegged at $2.20 a share, but analysts believe that is a lowball offer given the good longer term outlook for the sector.
Mermaid Marine is part of the Uncapped 100.