Reach Subsea (OB:REACH) - Share price, News & Analysis

Q: What is the Fair Price of REACH when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

REACH (NOK3.54) is trading below our estimate of [[fair value]] (NOK8.33)

REACH fundamental analysis
Snowflake Score
Valuation	2/6
Future Growth	4/6
Past Performance	1/6
Financial Health	5/6
Dividends	3/6

REACH Stock Overview

Reach Subsea ASA provides subsea services worldwide.

Rewards

Trading at 57.5% below our estimate of its fair value

Earnings are forecast to grow 33.83% per year

Risk Analysis

Shareholders have been substantially diluted in the past year

Unstable dividend track record

Large one-off items impacting financial results

Profit margins (6.7%) are lower than last year (13.4%)

+ 1 more risk

Reach Subsea Competitors

S.D. Standard ETC

OB:SDSD

kr987.9m

Eidesvik Offshore

OB:EIOF

kr563.1m

DOF

OB:DOF

kr357.6m

Havila Shipping

OB:HAVI

kr381.8m

Price History & Performance

Summary of all time highs, changes and price drops for Reach Subsea
Historical stock prices
Current Share Price	kr3.54
52 Week High	kr4.58
52 Week Low	kr2.50
Beta	1.52
1 Month Change	7.60%
3 Month Change	-8.05%
1 Year Change	30.15%
3 Year Change	73.53%
5 Year Change	64.65%
Change since IPO	-99.95%

Shareholder Returns

	REACH	NO Energy Services	NO Market
7D	-3.0%	1.6%	0.7%
1Y	30.1%	60.6%	10.5%

Return vs Industry: REACH underperformed the Norwegian Energy Services industry which returned 60.6% over the past year.

Return vs Market: REACH exceeded the Norwegian Market which returned 10.5% over the past year.

Price Volatility

Is REACH's price volatile compared to industry and market?
REACH volatility
REACH Average Weekly Movement	5.4%
Energy Services Industry Average Movement	8.4%
Market Average Movement	6.6%
10% most volatile stocks in NO Market	12.2%
10% least volatile stocks in NO Market	3.7%

Stable Share Price: REACH is not significantly more volatile than the rest of Norwegian stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: REACH's weekly volatility (5%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1909	128	Jostein Alendal	https://www.reachsubsea.no

Reach Subsea ASA provides subsea services worldwide. The company operates in two segments, Oil & Gas and Renewable/Other. It offers inspection, maintenance, and repair services, such as structural inspections, WROV operation, SCM changeout, scale squeeze operations, water injection, ready for operation, subsea equipment maintenance, repair, commissioning, and boulder clearance.

Reach Subsea Fundamentals Summary

How do Reach Subsea's earnings and revenue compare to its market cap?
REACH fundamental statistics
Market Cap	kr778.20m
Earnings (TTM)	kr47.05m
Revenue (TTM)	kr700.35m

16.9x

P/E Ratio

1.1x

P/S Ratio

Is REACH overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
REACH income statement (TTM)
Revenue	kr700.35m
Cost of Revenue	kr141.56m
Gross Profit	kr558.79m
Other Expenses	kr511.74m
Earnings	kr47.05m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Aug 23, 2022

Earnings per share (EPS)	0.21
Gross Margin	79.79%
Net Profit Margin	6.72%
Debt/Equity Ratio	6.5%

How did REACH perform over the long term?

See historical performance and comparison

Dividends

5.1%

Current Dividend Yield

56%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is REACH undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for REACH?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for REACH. This is calculated by dividing REACH's market cap by their current preferred multiple.
What is REACH's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	kr778.20m

REACH key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	1.3x
Enterprise Value/EBITDA	19.2x
PEG Ratio	0.5x

Price to Earnings Ratio vs Peers

How does REACH's PE Ratio compare to its peers?

REACH PE Ratio vs Peers

The above table shows the PE ratio for REACH vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	4x
SDSD S.D. Standard ETC	4.3x	n/a	kr987.9m
EIOF Eidesvik Offshore	9.2x	n/a	kr563.1m
DOF DOF	0.4x	n/a	kr357.6m
HAVI Havila Shipping	2.4x	n/a	kr381.8m
REACH Reach Subsea	16.5x	33.8%	kr778.2m

Price-To-Earnings vs Peers: REACH is expensive based on its Price-To-Earnings Ratio (16.9x) compared to the peer average (4x).

Price to Earnings Ratio vs Industry

How does REACH's PE Ratio compare vs other companies in the European Energy Services Industry?

Price-To-Earnings vs Industry: REACH is expensive based on its Price-To-Earnings Ratio (16.9x) compared to the Norwegian Energy Services industry average (9.2x)

Price to Earnings Ratio vs Fair Ratio

What is REACH's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

REACH PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	16.9x
Fair PE Ratio	13.8x

Price-To-Earnings vs Fair Ratio: REACH is expensive based on its Price-To-Earnings Ratio (16.9x) compared to the estimated Fair Price-To-Earnings Ratio (13.8x).

Share Price vs Fair Value

What is the Fair Price of REACH when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: REACH (NOK3.54) is trading below our estimate of fair value (NOK8.33)

Significantly Below Fair Value: REACH is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Insufficient data to show price forecast.

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Future Growth

How is Reach Subsea forecast to perform in the next 1 to 3 years based on estimates from 1 analyst?

Future Growth Score

4/6

Future Growth Score 4/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

33.8%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: REACH's forecast earnings growth (33.8% per year) is above the savings rate (1.1%).

Earnings vs Market: REACH's earnings (33.8% per year) are forecast to grow faster than the Norwegian market (0.5% per year).

High Growth Earnings: REACH's earnings are expected to grow significantly over the next 3 years.

Revenue vs Market: REACH's revenue (14.2% per year) is forecast to grow faster than the Norwegian market (-0.7% per year).

High Growth Revenue: REACH's revenue (14.2% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: REACH's Return on Equity is forecast to be low in 3 years time (17.9%).

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Past Performance

How has Reach Subsea performed over the past 5 years?

Past Performance Score

1/6

Past Performance Score 1/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

62.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: REACH has a large one-off gain of NOK13.3M impacting its March 31 2022 financial results.

Growing Profit Margin: REACH's current net profit margins (6.7%) are lower than last year (13.4%).

Past Earnings Growth Analysis

Earnings Trend: REACH has become profitable over the past 5 years, growing earnings by 62.7% per year.

Accelerating Growth: REACH's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: REACH had negative earnings growth (-45.5%) over the past year, making it difficult to compare to the Energy Services industry average (-45.5%).

Return on Equity

High ROE: REACH's Return on Equity (9.2%) is considered low.

Discover strong past performing companies

Financial Health

How is Reach Subsea's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: REACH's short term assets (NOK478.8M) exceed its short term liabilities (NOK433.9M).

Long Term Liabilities: REACH's short term assets (NOK478.8M) exceed its long term liabilities (NOK85.7M).

Debt to Equity History and Analysis

Debt Level: REACH has more cash than its total debt.

Reducing Debt: REACH's debt to equity ratio has reduced from 10% to 6.5% over the past 5 years.

Debt Coverage: REACH's debt is well covered by operating cash flow (794.8%).

Interest Coverage: REACH's interest payments on its debt are not well covered by EBIT (1.4x coverage).

Balance Sheet

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Dividend

What is Reach Subsea current dividend yield, its reliability and sustainability?

Dividend Score

3/6

Dividend Score 3/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Cash Flow Coverage

5.08%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: REACH's dividend (5.08%) is higher than the bottom 25% of dividend payers in the Norwegian market (2.74%).

High Dividend: REACH's dividend (5.08%) is low compared to the top 25% of dividend payers in the Norwegian market (6.82%).

Stability and Growth of Payments

Stable Dividend: REACH has been paying a dividend for less than 10 years and during this time payments have been volatile.

Growing Dividend: REACH's dividend payments have increased, but the company has only paid a dividend for 3 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (56.2%), REACH's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its low cash payout ratio (15.5%), REACH's dividend payments are well covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

5.9yrs

Average management tenure

CEO

Jostein Alendal

7.75yrs

Tenure

kr2,620,000

Compensation

Mr. Jostein Alendal has been the Chief Executive Officer of Reach Subsea ASA since November 2014 and serves as its Managing Director. Mr. Alendal served as Business Development Manager at Reach Subsea ASA....

CEO Compensation Analysis

Compensation vs Market: Jostein's total compensation ($USD270.73K) is about average for companies of similar size in the Norwegian market ($USD342.25K).

Compensation vs Earnings: Jostein's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.

Leadership Team

Experienced Management: REACH's management team is seasoned and experienced (5.9 years average tenure).

Board Members

Experienced Board: REACH's board of directors are not considered experienced ( 2.3 years average tenure), which suggests a new board.

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have been substantially diluted in the past year, with total shares outstanding growing by 56.6%.

Data	Last Updated (UTC time)
Company Analysis	2022/08/17 00:00
End of Day Share Price	2022/08/17 00:00
Earnings	2022/03/31
Annual Earnings	2021/12/31