I've spent the last few days looking at Hallin Marine, and they tipped me over the edge, announcing a contract win this morning. It looks a quality business.

Hallin floated on AIM in June. Established in 1998, Hallin is profitable - just under $1 million on turnover of $20million last time. market cap just 17 million.

It maintains, installs, surveys and repairs seabed equipment - pipelines etc. The company itself says that it is impacted by activity in the oil market, and when they floated oil was around $55. Now it is as we all know $65. Of course if you believe the oil market is still worth investing in (I have avoided to date) you'll probably like the fact that Halling raised funds at 64p and is currently 55p to buy.

They will benefit from the stronger dollar (lost over $200,00 on currency last year). Their saturation diving systems can support up to 12 people for a month on the seabed and customers have included BP, Shell, Mitsui, Premier and Total. it's important to have regional presence. As well as business bases in Singapore, China and Thailand they are expanding into the UAE.

It looks a good way to have exposure to oil in a relatively low risk area.

Worth taking an initial stake imho, as i have this morning.

Here is this morning's contract, which represents 25% of last year's turnover:

'Hallin Marine Subsea International plc

Hallin Marine Wins US$5m Order to Support Gulf of Thailand Pipeline

Hallin Marine, the AIM quoted provider of subsea solutions to the oil and gas
industry, announces that it expects to supply Diving Support Vessel services to
the PTT 3rd Pipeline Construction Project in the Gulf of Thailand. Hallin is in
receipt of a letter of intent* from Hyundai Heavy Industries ('HHI') regarding
this contract. This is in addition to Hallin's contract with HHI, signed in
July, to supply construction diving services to the same project.

The Diving Support Vessel work will take place in two phases, the first starting
in December 2005 and the second scheduled for February 2006, with a contract
value of approximately US$5 million.

The PTT 3rd Pipeline Project is a major expansion of the Thai Offshore Natural
Gas Infrastructure, which provides gas for the domestic market. A 606km
pipeline and associated offshore facilities is to be constructed from PTT's
Arthit field in the Gulf of Thailand to a landfall at Layong, south of Bangkok.
Under the two subcontracts awarded by HHI, Hallin Marine will provide all the
construction diving services from three pipelay barges as well as conducting
Saturation Diving and Hot Tapping of connections into the pipeline from the
Diving Support Vessel.

John Giddens, Chief Executive of Hallin Marine, said:

'We are extremely pleased to have been awarded this work. The Diving Support
Vessel side involves Hot Tapping and Saturation Diving services and is in
addition to the onboard barge construction diving services that we are already
contracted to supply to HHI for the PTT 3rd Pipeline Project. The winning of
these orders confirms that Hallin Marine is able to provide HHI with the
increasingly complex services they require, at competitive prices.'

Added again today, up to my quota for now!

One of the real beauties of this is that with oil at $75, orders should pour in and these orders tend to run for at 18 months to two years, as companies rush to repair pipelines or look to release previously uneconomic resources.
So if there ever was a downturn for the likes of HMS you can see it coming a long way away a in a sharply falling oil price and have years to unwind your position! Oil was $55 when HMS floated and business was good then, so I reckon with oil at $75, HMS has at least three years from here of clear water.
'When there is a goldrush, the wise man invests in the man who makes the shovels!'

Been tracking this since float, off and on. Now looks a very interesting time to take advantage of the recent pull back in the share price. However, a couple of questions for you more knowledgeable folks out there:-

Question 1) In the accounts to 31st December the FD's report mentions buying 6.5m assets for ROV based out of Aberdeen via bank loans. The current proposed share placing will raise 6.6m net. Are these 2 amounts the same money, or will the fund-raising be used for purposes additional to the ROV/bank finance expansion? I've emailed the company for the answer.

Question 2) What is your guess on turnover for next year? We already have $21m in the bag (assuming the recent sale of @5m and the order for 12 months maintenance are all booked by 31st Dec 2006).

Assuming the amounts in Q1 above are the same, then interest charges next year should be effectively nil and ROCE and Operating Margin will look good on turnover of about $35m (pure guess of, say, 33% increase over 2005) at 20% gross margin less 50% of gross profit on overheads makes $3.5m net profit before tax. This is a 10% OM (quite satisfactory) and (with the new capital raised of 6.6m added to existing) a ROCE (average capital between current value and this year's after the fund-raising) of nearly 22% with a PE of about 18 (allowing a 10% tax rate) BUT an EPS of pretty much the same as last year of 7.87c because of the increased share capital in issue and thus a PEG of infinite - very unattractive.

Conversely, to get the PEG down to a respectable 0.66 (for a high growth share) EPS need to rise by about 22% (7.87c + 22% = 9.60c EPS, gives PE of 14.6 and PEG of 0.66). To get EPS to rise 22% on shares in issue increased by 29%, net profits after tax must increase by 57.38%. With tax rate and gross margin as above and overheads restricted to, say, $3.5m (anyone think this too high?), this needs a turnover for 2006 of $38.8m - an increase of 46% on 2005. Operating margin would be 11% and ROCE would be 26%.

So, to rephrase Question 2) above, do you think we can achieve almost 50% increase in turnover and nearly 60% increase in after tax profits this year to justify the current price, let alone justify an increase in the SP?

Question 3) Does anyone know of any existing or pending broker's report on this company?

Question 4) Should I buy a) before the AGM, assuming all special/extraordinary items will be approved, or b) should I wait until afterwards, or c) should I wait until the new shares are issued for any dilutive effect to reduce the price?

All answers (and corrections to the arithmetic!) welcome.

sd

Wow! Numbers make your world go round eh! Seriously though, thanks for your efforts.
I do look at what I consider to be the key numbers, but don't go into the same depth as you do! I don't know with Q1, I would guess that they will use some of it to reduce repayments but some of it for expansion. That's how I would read the announcement.
I think profits will be up, but the recent sale will reduce (this year only) the speed of rise. Fwiw, Shares Rag said:
".......Going forward, the profit from the SAT unit sale skews 2006
forecasts a bit but, if we strip that deal out, it implies revenues of
$34 million (19.8 million) this year, rising to roughly $45 million
(26 million) in 2007. Even after assuming rising tax and interest
charges going forward, were still looking at underlying EPS of 5.6p
and 6.7p. Given that the oil services sub-sector trades on an
average PE of 22, a forward PE of 18 for Hallin by the end of this
year would imply a 120p share price, about 45% up from here.''

Edison research (I know nowt about them) came out with a buy rec as did growth Company Investor recently. Don't know of any other reports.

I do think these are a cracking buy and hold though, with substantial contracts up to two years ahead already booked.

Hawick - thanks for the response - will read the reports you mention. I take the Shares article to mean 2006 should be revenues of $34m + $5m SAT unit sale? Not sure how they get EPS of 5.6 = 9.9c - will review my figures (just for fun, you know!)

sd

Always wonder how the weekly rags get their figures! Two crass errors incidentally in the Shares Mag article:
1) They are not IOM based (Singapore if I remember)
2) They haven't expanded from the North Sea to other parts of the world - should be the other way round, they have just opened their Aberdeen division to take advantage of North Sea opportunities.
Have 'fun'! -:)

Hawick - the plc is incorporated in IoM, albeit their main area of operation has been Singapore, also M. East (?) and now Aberdeen.

Touchez! thanks SD.

Below is reply from PR firm re my Question1) in post 25 re use of new placing 6.6m

"Some of the funds may be used to cover the purchase of the ROV's but the real intention was to use these new funds to purchase further equipment in addition to teh new ROV's."

This alters the gearing quite significantly from 13% to 48% - still not too bad. But it does show they plan to expand even faster. Hope they have the mangement and logistics in place to do so.

Also sent me JMFinns note re prelims which I look forward to studying to see what they are projecting.

Still watching and waiting - got distracted by DEBT on the way.

sd

Not surprised you got distracted! Thanks for info I do feel management hasn't put a foot wrong so far so hopefully that can continue. Resolutions ok'd as expected.
'The EGM Resolutions were passed and it is expected that the new
shares will be admitted to AIM on Thursday 27th April 2006. The placing will
raise 6,930,000 before expenses which will be used for further investment in
additional plant and equipment for the Group's business.'

For sure this adds to their borrowings, and risks but is a logical and major advance, taking Hallin a very significant step nearer the big league.

Hallin Marine, the AIM quoted provider of subsea solutions to the oil and gas
industry, has signed a contract for the construction of a 78 metre DP2 Subsea
Operations vessel.

The order confirms Hallin's stated intention to own its own operating vessel and
is seen by the board as a logical step in growing the company's operating
margins and ensuring continuity of vessel supply.

The build contract has been awarded to Singapore based Pan-United Marine Limited
('PUM') for up to US$ 22.6M, depending upon the final options agreed.

In addition a further US$3M will be invested in a state of the art SAT system
incorporating an advanced self propelled hyperbaric rescue chamber for exclusive
use with the vessel and a suitably sized crane will also be added.

The vessel, to be named SOV Ullswater, will be built to Hallin's own design and
specification and is scheduled to be delivered to Hallin in the final quarter of
2008.

Hallin presently operates marine vessels and currently has the Toisa Voyager and
the Sanko Angel under long-term charters.

The cost will be 80% financed through debt with the remainder from the company's
cash reserves. Last month Hallin completed a placing which raised 6.9 million;
the funds will be primarily used to invest in additional plant and equipment to
take advantage of the continued high demand for the Group's services.

John Giddens, Chief Executive of Hallin Marine, said:

'The purchase of our own vessel, specifically designed for subsea operations,
is a transforming event for Hallin. It will enable us to significantly increase
our profit margins on a significant number of the contracts we carry out each
year. It will also give us greater flexibility and the ability to offer clients
a more complete product.

'We have worked closely with Pan-United in the run up to the award of this
contract to develop the vessel that we need at the right price. Pan-United have
a sound reputation for quality and delivery on time and we will continue to work
closely with Pan-United during the build of SOV Ullswater.'

Despite yesterday's market HMS ticked up and now the chart is looking to break to new highs, which could presage another run up.

Looking cheap having participated enthusiastically in the recent pullback!!

Confess to picking up a few more myself yesterday.

Nice news yesterday:

Hallin Marine, the AIM quoted provider of subsea solutions to the oil and gas
industry, announces its success in winning two new contracts with a combined
value of a minimum of US$4.3 million.


Hallin Marine has been awarded a one month contract valued at US$2.5 million for
diving support of a subsea pipeline installation off Thailand for local energy
major PTT and a US$1.8 underwater repair and maintenance contract by Premier Oil
for its gas field off Indonesia.


The main contractor for the Thailand project, Hyundai Heavy Industries (HHI),
awarded the contract to Hallin, which has taken the Diving Support Vessel,
Gulmar Condor, on hire under a standard charter agreement to utilise it as a
platform for Hallin Marines' Saturation Diving System and Remote Operated
Vehicle ('ROV').


The contract may be extended for up to a further two months by HHI.


The second contract Hallin has secured is an Underwater Repair and Maintenance
contract for Premier Oil's Anoa Field in the Natuna Sea.


PT Hallin Marine Indonesia, Hallin's recently established wholly-owned
subsidiary, secured the base contract that is valued at US$1.8 million for the
supply and operation of a DP1 Vessel, a Workclass ROV, together with
intervention services with offshore works, and will start within the next few
weeks.


John Giddens, Chief Executive of Hallin Marine, said:


'We are delighted with these major contract awards. These are excellent project
wins in themselves and both will produce real progress, in different ways, for
our company. The charter of the Gulmar Condor will strengthen our capability and
the second contract win for our newly established office in Jakarta, Indonesian
is a great step forward.


'The HHI contract continues to build on our strong relationship with Hyundai.
The Gulmar Condor, which we are taking on charter for the Hyundai work off of
Thailand, is an excellent diving support vessel ideally suited to our
requirements.


'The Premier Oil contract is another success for our new Indonesian subsidiary.
The works are to be carried out in Premier's Anoa Field which are Gas producing
facilities offshore in the Natuna Sea supplying Singapore via the West Natuna
Transport System Pipeline.


'Premier Oil is a highly respected oil operator and we are pleased to secure our
second subsea contract with Premier and look forward to working with them once
again.'

Another small but of course welcome contract this morning.:
$1.1 million
Hallin Marine, the AIM quoted provider of subsea solutions to the oil and gas
industry, announces the Contract Award for the provision of a Subsea
construction contract for Talisman Energy at the Bunga Raya Field, offshore
Malaysia.

At short notice Hallin has mobilised the DP1 vessel 'The Mariner', operated by
Sealion and Survey and positioning equipment, Air Diving System, Workclass ROV
and specialist subsea personnel and operators to provide support of installation
of additional offshore platform piles. This activity is part of the Water
Injection Development of the Talisman offshore installation with works expected
to be completed by end of July 2006.

John Giddens, Chief Executive of Hallin Marine, said:
'We are pleased to win our first contract with Talisman Energy in Malaysia. The
speed that we have mobilized this complex package demonstrates our
professionalism and expertise as a marine and subsea contractor.

Interesting re-the BP problems in Alaska which requires massive pipeline repair after a whistle-blower threatened to expose how long BP have been (according to him) camouflaging the problem.

Nice idea for a cracking ramp would be to speculate that HMS would get a bumper contract.
...................But they don't operate in Alaska (though once they get their own rapid response vessel it might well enable such contracts)..............

Drat........................

But interesting to see if other companies decide to come clean and get a few repairs done in areas HMS do operate in...............

stock up a little over the last couple of days....

results last year were 12th Sept, so expecting about the same time this year?

Ran strongly into then up from good results a year ago - should deliver knockout figures this time around, judging from contracts, +day & utilization rates. FY eps THIS year should be in region of 11p, so only 6x PE. New ships to come into use in 2007....

Should deliver strong statement, good cash flows and possibly a dividend surprise

Amities / Although this company provides specialist equipment to companies who operate in a corrupt,dangerous, and cut throat environment fraught for the most part with geo-political problems and tensons the rotary count { inc. workovers }even working at full capacity cannot cope with industry { operator} demand. !! .. .lts as simple as that really. The dearth has brought us to a vicious bottleneck which for once cannot be laid at the IEA or OPECS front door.. We simply UNDERINVESTED at a time when oil was $20 p/b and as such we are witnessing many of the smaller junior expos struggling even to get a sniff of an appropriate rig / for up to 12/ 18 months . ...................................................................................................................Of those who manage who manage to attain rigs they are ALWAYS delayed as the previous operator exercises that part of the contract which allows them a usul 3 month extension .The chronic underestimated shortage of both FPVS, ROVS, and all manner of offshore specialist submersives right down to simple couplings and come to that the utter and total misunderstanding of the entire oil industry makes for dismal reading...... BUT make Hallin worth casting an eye over. Fundementallyi would of course prefer the gearing to be a little lower; but like the water industry it is a capital intensive business and cashburn is severe ,..Lets face it ; Even with oil at record levels the actual producers have suffered quite severe s/p retracements this past 2 months . BUT !! The gas/oil infrastructure suppliers have remained bullish and agggresive, and the only question we need concern ourselves is how snr management deal with what could be a real money spinner {Wait until the "summer driving season and the first drop of snow in NY manifests itself , and i think junior and midcap oil will take off taking with it a host of suppliers on their second leg north . ..Having observed SDX, Abbots Woods ,Hunting ( lronically Hunting released its finals today which illustatated profits SURGED over 850% !!!....gulp !!,,,,,,,ALORS !!! and a plathora of similar related related secondaries who enjoyed success in equal measure ; and all which seems to suggest the neccassary aggresive growth which SD says quite rightly is needed to justify its place in such illustrious company is very possible . . i am hoping Hallin can replicate thier peers relative performances . And Why not ? Only the matter of gearing is a weakness - but i concede i could perhaps picking straws as this variable poses very little concern to myself as i believe oil will NEVER retreat to $25 p/b as suggested recently by Lord Browne @ BP. . Whose force feeding that man such patent nonsense ; or is he too busy counting his bonus' . .. Morelike $100 during the winter ,,and once hedge funds & co stop " shorting " oil NOTHING can hold it back . NOTHING !! , But nobody seems to give a jot reg. cost anyway . Had the case for $100 p/b been made clearer to the market in the 1980,s it would have crashed .. But now ? - qui sait ? . Who knows or really cares ?? . OIL is the / OUR prerequisite to modern 21st century living .....and ANYWAY the boys at the Fed Reserve will print the money regardlesss by way of T Bonds winging their way to China and lndia and dare i say , Vietnam. .... . Anyway im with you boys ... VERY Exiting times ahead i hope . !! ..B/Chance ..@+ J

Okay all gone quiet on this one

I don't much like these type of stocks as when the going is good their employees i.e. divers and others tend to demand and get massive wage rises so longer term contracts, priced on old salaries, lose most of their margin. As such I have not been involved

But look at the graph fallen massively since the 77p placing on this sort of margin problem but on little volume. Contract news has been good too. For details look at TheFrenchConnection above

Why I am interested now is that these guys normally have a Jan trade statement so if everything OK to good as previously good chance of a jump towards 60p IMHO
If no statement by end of this month though just throw out

Company just confirmed that they will be making a trading statement " about the same time as last year" ie 16th Jan ish. No negative pre-announcement, so hopefully a useful update will follow.

Decent bounce now starting today, with a bit of volume

"Trading levels for the year have been ahead of expectations."

delivering the new diving systems and ROV's on time, already earning them money. Contract dispute settled as well.


The offshore oil and gas industry has remained extremely buoyant during 2006
driven both by the continued high price for oil and gas combined with the
significant repair activities in the Gulf of Mexico following the damage
incurred in the 2005 hurricane season. As a result there has continued to be a
high demand for Hallin's services.

The extensive refurbishment programme of its older Saturation Diving Systems was
completed in the first half of the year which allowed utilisation levels to
return to historically normal levels in the second half of the year. The second
half also saw a significant increase in the number of assets in use by Hallin
with a consequent rise in the level of turnover.

The construction of two new Saturation Diving Systems was completed during this
period and during August and September Hallin took delivery of its first four
Remote Operating Vehicles (ROV's) which have all been satisfactorily
commissioned and engaged in profitable work.

Trading levels for the year have been ahead of expectations. Profit levels would
also have been ahead of expectations except for the "one time" cost of settling
the contract dispute outlined in our Interim Results Statement which was
released in September 2006. The details of the dispute settlement are set out
below.


SETTLEMENT OF CONTRACT DISPUTE

As stated in our Interim Results Statement released in September 2006, a
significant contractual dispute arose with a key client during the trading year.

After careful consideration this was settled earlier this month and this has
resulted in a non-recurring write off of US$1.65 million.

Although Hallin's legal advice was that it was likely to be successful at
arbitration, having regard to the scale of the legal costs, the possibility of
their being irrecoverable, the extended time associated with arbitration and the
considerable ongoing impact on management resources, the directors reluctantly
decided, on balance, it was in the long term interests of the Company to settle
the dispute. As a result, invoices outstanding with the client to a value of
some US$5 million have now been settled.