Medserv, Discovering and Delivering – Edison issue new flashnote
Earlier this week, Edison Investment Research issued a flashnote on Medserv plc following the Company’s recent announcement of a significant contract win in a new geographical territory and the latest lean gas discovery announced by ENI offshore Cyprus. The report issued by Edison highlights that these two announcements are supportive to Medserv’s operations and underpin the potential for substantial revenue growth going forward. As a result, their DCF-based fair value of the Medserv share price was revised to €1.64 per share.
Medserv Discovering and delivering
Medserv has started FY18 with a positive operating backdrop. Last week,ENI announced a lean gas discovery in Block 6 Offshore Cyprus. Meanwhile, the company has reported further success with its strategy toexpand into new territories, with a three-year contract. We believe thatbuilding operational visibility in Cyprus while expanding internationally supports the potential for substantial revenue growth for 2018-20.
ENI is the leading offshore IOC operating in the Mediterranean and Medservsupports its drilling operations in Cyprus from its onshore bases in Larnaca andLimassol. The latest lean gas discovery announced by ENI offshore Cyprus isbelieved to be ‘Zohr-like’ in nature. Zohr, offshore Egypt, is the largest gas field inthe Mediterranean currently. ENI has a 50% participation in Block 6 where the newfind has been made and Medserv’s ILSS business recommenced support for thedrilling programme in Q417. The new find should provide an extended drillingprogramme, providing greater visibility and improved returns from Cyprus.
Meanwhile, we have made it clear that Medserv’s strategy is to develop itsoperations into new territories. The company announced on 23 January that it hassecured business, via a competitive tender, in “a market, considered by the industryto be the big new energy source on Europe’s doorstep”. The threeyear c €10mcontract to provide integrated logistics support services for the production phase ofoffshore has an option to extend. Due to commercial considerations, the name ofthe IOC has not been disclosed at this time.
These two announcements are supportive to Medserv’s operations, underpinningthe potential for substantial revenue growth going forward and our fair value of€1.64 per share. Preliminary results are scheduled for 27 April 2018.