OMS Energy Technologies Inc. (Nasdaq OMSE) manufactures and sells specialty connectors and pipes, surface wellhead and Christmas trees, premium threading services, and ancillary services. Internationally recognised, doing business in Saui Arabia, Singapore, Malaysia, Thailand, and Indonesia. With specialty equipment for drilling of oil exploration projects, which include threading, inspection, tubular running services, machine shop service of tools and equipment, sales of tubular accessories, manufacture and repair of drilling tools, drilling tubular tools, and drilling accessories. OMS Energy Technologies Inc. is based in Singapore and founded in 1972.
Catalysts
1. Provides key products to high demand regions; Asia Pacific, Middle East, North Africa
2. Core products include Surface Wellhead Systems, Tubular Goods, and Premium Threading Service, which increase the efficiency of onshore and offshore drilling, production and delivery.
3. Conflict de-escalation in oil producing areas could benefit OMSE in terms of transit and increased demand from damaged and old infrastructure revitalisation projects.
4. Operates strategic manufacturing facilities in six countries, located near oil-producing areas.
5. Strong base to work from in financials.
Industry Tailwinds
1. Global energy sector resurgence along with geopolitical shifts are revitalizing energy infrastructure investments. The Middle East, Southeast Asia, and North Africa are showing development and growth, where OMSE is focused.
2. The global energy mix with goals to achieve net-zero emissions, still lean on oil and gas. OMSE’s surface wellheads and oil country tubular goods are in demand.
3. Efficiency building via R&D in additive manufacturing, ISO process certification ensures sustainability and customisation.
4. OMSE’s post IPO perfomance, reporting 24.7% revenue growth and strong 33.9% gross margin, place the company in a position to expand and grow.
5. Strategic proximity to customers with 11 facilities in six countries.
Industry Headwinds
1. Cyclical industry tied to global energy prices, capital expenditure cycles, and inconsistent drilling activity.
2. Procurement and sales cycles are long and tedious. New product lines are slow to adopt because of qualification period.
3. Possible disruption to logistics, labor, or compliance could affect products and services within that region.
4. Possible negative perception due to past subsidiary status of another company.
Financial Metrics
Revenue $203.6 million
Implied P/E Ratio 3.0
Assumptions
By 2030, OMSE’s revenue will be around $300-$310 million based on possible expansion in Indonisia, Thailand, and North Africa. This could lead to further contract awards for both products and services.
Net Income could be in the range of $60-$75 million should cost discipline and regional efficiencies maintain margins. This is with no logistic, procurement or regulatory dirsuptions in this scenario.
Risks
1. The cyclical oilfield sector will affect the business; less drilling leads to delays; delays lead to cancelled contracts.
2. Realisation of revenue could be affected by long sales cycles and operator qualification.
3. Political instability will affect the business and put pressure on the entire O&G industry.
4. Operating in various regions exposes OMSE to currency fluctuations.
5. Bigger companies could undercut pricing to prospect customers.
Valuation
3-Year Outlook
· Revenue for OMSE in 3 years-$293.8 million
· Earnings for OMSE in 3 years-$64.7 million
5-Year Outlook
· Revenue for OMSE in 5 years-$375.1 million
· Earnings for OMSE in 5 years-$82.6 million
10-Year Outlook
· Revenue for OMSE in 10 years-$823.7 million
· Earnings for OMSE in 10 years-$181.3 million
Overall
It should be stated that FY2024, actual Net Profit of $35.1 million, achieved through normal business lines, when compared to FY2025 Net Profit of $47.0 million is a 33.9% gain. The reported Net Profit includes $49.4 million gains from the management buyout, a one-off event. This one-time event makes the YOY Net Profit change appears to be a loss.
Strong revenue and earnings, available growth vectors, and promising outlook in a cyclical industry which ebbs and flows with prevailing international conditions, OMSE presents itself as a “well” of opportunity (pun intended).
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Disclaimer
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