Lamprell Plc – Value Analysis (LONDON:LAM) : December 21, 2017

Capitalcube gives Lamprell Plc a score of 13.

Our analysis is based on comparing Lamprell Plc with the following peers – Petrofac Limited, Gulf Marine Services PLC, Renew Holdings plc and NCC AB Class A (PFC-GB, GMS-GB, RNWH-GB and NCC.A-SE).

Investment Outlook

Lamprell Plc has a fundamental score of 13 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • From a peer analysis perspective, relative outperformance last month is up from a median performance last year.
  • It’s current Price/Book of 0.62 is about median in its peer group.
  • LAM-GB‘s EBITDA-based price implies better than peer median growth.The market seems to expect a turnaround in the company’s current EBITDA-based return on equity.
  • LAM-GB‘s relatively low net margins and poor asset turns suggest a problematic operating strategy.
  • Changes in annual revenues are in line with its chosen peers but lags in terms of earnings suggesting that the company is less cost conscious and may be spending for growth.
  • LAM-GB‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • While LAM-GB‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median Price/EBITDA ratio and may be factoring in some sort of a strategic play.
  • The company seems to be over-investing in a business with median returns.
  • LAM-GB seems too levered to raise additional debt.

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Leverage & Liquidity

LAM-GB would seem to have a hard time raising additional debt.

  • With debt at a relatively high 30.94% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 49.41%), and relatively tight interest coverage level of 0.80x, LAM-GB would have a hard time raising much additional debt. The company has a Constrained profile in terms of its ability to take on further debt.
  • All 4 peers for the company have an outstanding debt balance.

LAM-GB has moved to a Limited Flexibility from a relatively high liquidity profile at the prior year-end.

  • LAM-GB‘s interest coverage has declined 4.44 points from last year’s high and is now below its four-year average interest coverage of 2.51.
  • While its interest coverage decreased to 0.80x from 5.23x (in 2015), its peer median increased during this period to 6.22x from 5.23x.
  • Interest coverage fell 5.42 points relative to peers. It is also below the 2.50x coverage benchmark unlike the peer median.
  • LAM-GB‘s debt-EV continues to trend upward but is still within one standard deviation below its four-year average debt-EV of 36.21%.
  • The increase in its debt-EV to 30.94% from 26.45% (in 2015) was also accompanied by an increase in its peer median during this period to 49.41% from 27.34%.
  • Relative to peers, debt-EV fell 17.58 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Petrofac Limited 68.91 1.26 6.22 23.24
Gulf Marine Services PLC 67.88 0.15 1.57 12.33
Renew Holdings plc N/A 0.72 43.28 167.51
NCC AB Class A 12.22 1.26 14.98 86.85
Lamprell plc 30.94 2.95 0.8 45.9
Peer Median 49.41 1.26 6.22 45.9
Best In Class 12.22 2.95 43.28 167.51

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Company Profile

Lamprell Plc provides fabrication, engineering and contracting services to the onshore and offshore oil, gas and renewable energy industries. It operates through the following businesses: New Build Jackup Rigs (NBJR), Modules (MOD), Offshore Platforms (OP), and Oil and Gas Contracting Services (OGCS). The NBJR business derives its revenue from assembly and new build construction for the offshore oil and gas and renewables sector. The MOD business covers the revenue from fabricating packaged, pre-assembled and modularized units; and constructing accommodation and complex process modules for onshore downstream projects. The OP business extracts its revenue from the construction of complex living quarters, wellhead decks, topsides, jackets, and other offshore fixed facilities. The OGCS business comprises of rig refurbishment, land rig services, engineering, construction, operation, and maintenance. The company was founded by Steven D. Lamprell in 1976 and is headquartered in Dubai, the United Arab Emirates.

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