Gulf Island Fabrication: Signs Of A Turnaround

Summary

  • Gulf Island Fabrication has a new CEO and a turnaround plan in place.
  • New management has been quick to act and willing to write down assets, close facilities, and adjust market strategy.
  • The company's balance sheet remains pristine.
  • Gulf Island Fabrication is already appealing based on the value of its assets; a turnaround is not required for the company to be a buy at these levels.

Gulf Island Fabrication (NASDAQ:GIFI) shares have performed poorly since I last wrote about the company in October. Shares are down 45% in the last six months and 70% over the last year. At the time of this writing, the company trades at almost half the value of its net current assets. The market has chosen to heavily discount GIFI's shares despite $70 million of cash on the balance sheet and zero long-term debt. I find this particularly puzzling because there have been some positive organizational developments at the company in the last six months, most notably the appointment of a new CEO. The previous CEO, Kirk Meche, was replaced by Richard Heo in November and Mr. Heo has already begun a company-wide shakeup. Heo has scheduled the closure of the underutilized Jennings shipyard, consolidated divisions within the company, and laid out a plan to move into onshore oil and gas fabrication projects. These changes haven't yet resulted in operational profitability, but the value of the company's assets remains intact and having a turnaround plan in place creates a potential upside catalyst that could materialize in the next six to twelve months.

A Turnaround Plan has Emerged

Mr. Heo has taken a number of large steps in his first six months as CEO. Most impressive to me has been admitting that the company's bidding process has been a failure and that most of the company's backlog will not generate profits. On his first conference call as CEO, Heo stated that he is already taking action to address the problem:

"First, we will be more disciplined in pursuing and evaluating prospects. We cannot and will not bid every opportunity that we see in the market. Our resources will be focused on profitable opportunities in which we offer a competitive and strong value proposition to our

This article was written by

I'm a big believer in the idea that there are "No Called Strikes" in investing. I put a lot of companies in the "too hard" pile, but I swing big when I find a great investment idea.

Disclosure: I am/we are long GIFI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article should not be taken as financial advice, it is only an expression of my own opinions as an individual investor

Recommended For You

Comments (20)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.