Paratus Energy Services $PLSV (+0,83%) has positioned itself as an attractive investment in the offshore services sector since its listing in June 2024. With a diversified business model, an exceptionally high dividend yield and a solid financial base, the company offers interesting prospects for income-oriented investors. Below is a comprehensive analysis taking into account the latest insider purchases and other relevant developments.

Company profile

Paratus is a holding company with three central holdings:

1. Fontis Energy: operator of five high-specification jack-up drilling rigs in Mexico, which are leased on a long-term basis to a state-owned customer.

2. Seagems: a 50/50 joint venture with Sapura Energy that operates six multi-functional pipe-laying vessels (PLSVs) in Brazil.

3. Archer Limited: A minority interest (24.2%) in a global provider of drilling and well services.

Financial highlights

1. revenue and EBITDA:

- In the third quarter of 2024, Paratus generated revenue of USD 110 million and an adjusted EBITDA of USD 63 million.

- The secured order backlog amounts to 2.3 billion USDwhich is approximately 92 % of the expected revenue for 2025 covers.

2. cash flow and debt management:

- In 2024, Paratus generated free cash flow (FCFE) of up to USD 345 millionwhich creates room for dividend payments and debt reduction.

- Net debt amounts to USD 597 millionwith most of the debt not due until 2029.

3. dividend yield:

- In Q2 and Q3 2024, the company distributed USD 0.22 per share which corresponds to an annual dividend of USD 0.88 per share. With a share price of around EUR 4.16, this results in a dividend yield of over 20 %.

New developments and insider purchases

1. insider purchases by Lodbrok Capital LLP:

- On December 23, 2024, Lodbrok Capital LLP announced the acquisition of additional shares in Paratus Energy Services through its fund Lodbrok European Special Situations & Dislocated Credit Opportunities Sarl. This demonstrates the confidence of a major institutional investor in the future development of the company.

2. increase in the stake in Archer Limited:

- In October 2024, Paratus invested a further USD 12 millionto support a strategic acquisition by Archer. This strengthens the company's position in a high-growth market segment.

3. uplisting to Euronext Oslo Børs:

- In November 2024, Paratus was successfully upgraded to the main stock exchange, increasing the company's visibility and facilitating access to institutional investors.

Strengths of the company

1. diversified business model:

- The combination of offshore drilling services (Fontis), subsea technology (Seagems) and investments (Archer) offers stability and growth potential.

2. attractive market conditions:

- Rising daily rates for both PLSVs (up to USD 300,000/day) and jack-ups (up to USD 165,000/day) are improving margins.

- The offshore market in Brazil and Mexico shows positive long-term prospects.

3. solid dividend policy:

- The high payout ratio (approx. 42% of FCFE) indicates that the dividend is sustainable and could potentially increase.

Risks

1. dependence on major customers:

- Fontis is heavily dependent on a state-owned customer in Mexico, which is currently experiencing payment delays (outstanding receivables: USD 283 million). However, the Mexican government has promised financial support.

2. market volatility:

- Changes in oil and gas prices could influence the demand for offshore services.

3. capital-intensive industry:

- Operating and maintaining the fleet requires high levels of investment, which could pose a risk in the event of unexpected market changes.

Conclusion

Paratus Energy Services combines stable income from long-term contracts with an attractive dividend yield and growth potential through increasing daily rates and new contracts. Recent insider purchases and strategic investments underline the confidence in the company. Despite risks such as dependence on major customers, Paratus remains a promising investment for income-oriented investors due to its solid financial position and strategic orientation.

The share offers an exceptionally high dividend yield (>20%) and is particularly interesting for investors looking for stable income. However, investors should continue to closely monitor potential risks such as market volatility or defaults.

Sources

[1] PDMR-Form_23.12.2024.pdf https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/30259846/954a351e-7e9f-4537-b6b4-fe1e58380706/PDMR-Form_23.12.2024.pdf

[2] Q3-2024-Interim-Results-Report.pdf https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/30259846/6c98a214-d81c-48ff-97cc-22f3d8f784f3/Q3-2024-Interim-Results-Report.pdf

[3] Paratus-Energy-Company-Presentation-November-2024.pdf https://ppl-ai-file-upload.s3.amazonaws.com/web/direct-files/30259846/6b963087-a4a9-4f67-b957-74dd5cc4c5ba/Paratus-Energy-Company-Presentation-November-2024.pdf

@Jo_Wolf
@AlterMann

Hi everyone, I'm currently looking for high-dividend stocks that I think look undervalued. I would like to introduce you to my favorites and look forward to your additions. Let's get started:

$FMG (+0,32%) - Fortescue Metals Group

Fortescue is one of the world's leading iron ore producers with a dividend yield of 10.7%. The stock currently trades at a favorable P/E of 6.53 and shows upside potential of around 12% based on an intrinsic valuation of AUD 20.45. Despite a share price decline of over 36% last year, FMG remains an attractive candidate for dividend hunters due to its high EBIT margin (46.76%) and solid balance sheet.

$PLSV (+0,83%) - Paratus Energy Services Ltd.

Paratus Energy Services is a specialist in offshore energy infrastructure, particularly in Mexico and Brazil. With a dividend yield of an impressive 21.05% and a forward P/E ratio of just 6.07, the share appears highly undervalued. The current share price is around NOK 44.66, while the fair value is estimated at around NOK 89.49 - an upside potential of over 50%. The high margins (EBIT margin: 46%) and stable cash flows make Paratus an exciting choice.

$KCC (+1,89%) - Klaveness Combination Carriers

KCC is a leading provider of combined cargo ships and offers an exceptional dividend yield of 18.4%. The share is currently trading at a P/E ratio of just 4.19 and is undervalued by around 35% compared to its fair value of around NOK 119. Despite a difficult year (-17.9%), the company impresses with strong net margins (33.29%) and a solid balance sheet.

$BCE (+1,92%) - BCE Inc.

BCE is one of Canada's largest telecommunications companies with a stable dividend yield of just under 12%. After a share price decline of about 14% last year, the stock is considered undervalued (fair value: ~$85). BCE benefits from its market-leading position and continued investment in fiber optic networks, which could support long-term growth.

$NPI (+0,86%) - Northland Power

Northland Power is a global renewable energy provider with a focus on offshore wind power. The share offers a dividend yield of 6.7% and is currently trading well below its fair value (fair value: ~$41). Analysts see upside potential of over 60%, supported by major projects such as Hai Long and Baltic Power.

$UKW (+1,14%) - Greencoat UK Wind

Greencoat UK Wind invests in UK wind farms and offers a stable dividend yield of around 10.5%. The current share price (~126p) is well below the average target price (190p), signaling upside potential of around 50%. Thanks to its inflation-linked dividend policy and solid cash flows, UKW remains an attractive option for long-term investors.

I look forward to your additions or opinions on these stocks!