Entering text into the input field will update the search result below

Gulf Island Fabrication: The Turnaround Continues


  • Gulf Island Fabrication has sold the majority of its shipyard division.
  • The company is booking the transaction at a loss, but is getting rid of the unprofitable backlog.
  • Gulf Island will have about $60 million in cash after settling working capital requirements.
  • The remaining Fabrication division has higher margins and active bids for major project work.
  • Gulf Island still has problems to solve, but management is making the right moves and showing they are serious about turning the company around.

Yellow U TurnTraffic Sign on Blue Sky
Photo by MicroStockHub/iStock via Getty Images

Gulf Island Fabrication (NASDAQ:GIFI) is a company in transition. When I last wrote about them they had hired a new CEO, consolidated divisions, and adjusted their go-forward strategy. GIFI took another step forward this

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.https://www.tipranks.com/experts/bloggers/no-called-strikes-investing

Analyst’s 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.

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

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (31)

No Called Strikes Investing profile picture
I was wondering when the market was going to remember that GIFI has heavy exposure to oil and gas prices and should do better in a high energy price environment.
Jamm Systems profile picture
Just came across results for Matrix Service Company for their quarter ending Sep 30 (2021). They seem to be a competitor of GIFI. It's interesting they said they had a very good book to bill for the quarter- 1.6 for their Storage and Terminal Solutions group, which seems to be the most similar to GIFI.

“Bidding remains extremely strong across all segments with numerous opportunities in LNG and NGL facilities, midstream gas processing, hydrogen and other renewables, as well as electrical infrastructure and mining and minerals.”

BTW, they had weak financial results due to some cost overruns, and also because they're running at less than full capacity. They're not covering all their overhead costs.

Their Storage and Terminals group had the worst margins for the company...

Am not sure exactly what this says for the competitive environment for GIFI, since I don't know how these companies overlap.
No Called Strikes Investing profile picture
@Jamm Systems I admit I am not familiar with Matrix. I also admit I was expecting GIFI to have announced a contract win of some kind by now (they had mentioned Q3 as a potential timeline). There is still plenty of safety with GIFI and things are marginally improving anyway, but I was looking for a major contract to act as a catalyst.
Jamm Systems profile picture
GIFI today- tax loss selling hitting?
No Called Strikes Investing profile picture
@Jamm Systems Maybe? Whole market was down until fed announcement; this might pop back up as the day goes on.
No Called Strikes Investing profile picture
More evidence of turnaround progress: ir.gulfisland.com/...

I don't think this warrants a whole new article, but in general it looks like a reasonable acquisition. $8mm feels like the right size to not be overly risky but also provide meaningful value. If the announcement is accurate that they got the company for only 3x operating earnings, that is a great price.

I would have preferred that the announcement was about winning a major fabrication contract, however.
No Called Strikes Investing profile picture
A pretty good earnings report. Almost at net cash, and certainly trading well below book value. Once the shipyard work rolls off this will be a modestly profitable micocap with tons of cash and improving prospects. The turnaround continues!
Jamm Systems profile picture
@No Called Strikes Investing Yeah, I'm a little surprised that the ER didn't reference the impact of the hurricane on revenue as much as I thought it would. They lost a significant part of the quarter to the hurricane shutdown- and I imagine the cleanup affected them as well. Long and strong on this one!
Jamm Systems profile picture
Well, I liked it at $4.17 and I like it even more now, at $3.95.

It's one of my dinky portfolio of "high risk/high reward" stocks, I usually have 5 or so, small position; nice upside but with risk.

It would be nice, though, if management were a bit more talky.
No Called Strikes Investing profile picture
@Jamm Systems Agreed, but I think the main thing that will move the stock is if they win 1 or more of their open bids for pipeline/plant fabrication. I imagine this stock does nothing until a deal is announced, and then will have a very steep jump. No news and then a lot of important news all at once.
Jamm Systems profile picture
@Carleton Hanson Totally agree! One other little thing- they might get some business related to reconstruction after the hurricane. Smaller short term stuff that can carry them through till the bigger deals hit.
Jamm Systems profile picture
@Carleton Hanson Anybody know anything about damage to their main facility in Houma?
No Called Strikes Investing profile picture
@Jamm Systems I think it is too early to know for sure, but in general I get the vibe there was less destruction in general from the hurricane than people were expecting. Or else it has been so bad that reporting about it has been difficult.
No Called Strikes Investing profile picture
@Jamm Systems Looks like some impact, but pretty minimal:

Jamm Systems profile picture
@Carleton Hanson Yeah, it's terrific news for GIFI (so naturally the stock traded down Friday LOL). I'd think now that they're particularly well-positioned for some rebuilding work that might come up as a result of the storm. Might not be big projects, but it's stuff that could carry them through until their big bids are decided.
Jamm Systems profile picture
CFO change. Former CFO had been with the company before Heo's arrival. New CFO worked with Heo at CB&I. Don't see anything at all negative about the change.
Jamm Systems profile picture
@Jamm Systems Sorry, chief accounting officer change. CFO was already on board! My bad. Old CAO left, CFO took over responsibilities.
No Called Strikes Investing profile picture
Q2 earnings look okay: seekingalpha.com/... . More signs that the turnaround is working, and happy to see $9mm in PPP loan forgiveness (this will show up in Q3 results)
Timothy Stabosz profile picture
Inside buying reported by the CEO, 10,000 shares on each of May 18th and May 19th! This stock is undervalued.
@Timothy Stabosz Thanks, good info. Just confirming the insider buying to be true (figure it always helps to have someone cosign). From the Form 4 filed on May 19th:

5/18: 10,000 shares purchased at $4.44
5/19: 10,000 shares purchased at $4.51

All purchases appear to be direct purchases made by the President and CEO.
Jamm Systems profile picture
BTW, lack of volume after the positive news is surprising. Traded a mere 7K shares yesterday, and looks like a very small # today. At $4 per share, we're talking less than $30K daily trading volume LOL!
Timothy Stabosz profile picture
Carleton, agree with your thesis and I am substantially long here. Stock is still too close to its all time low, relative to the improved prospects, and (still) overcapitalized balance sheet. Looking for a further “reversion to the mean” over the coming months. (It would certainly help if insiders stepped up and bought.). This is one of the few deep value opportunities left in this frothy marketplace. (UIHC, EZPW, DWSN, and GASS would be a few others.)
No Called Strikes Investing profile picture
@Timothy Stabosz Thanks for checking out the article. The main appeal is definitely the price and the balance sheet, and to your point I don't think the market yet appreciates the potential positive outcomes. I would love to see some insider buying as well.
No Called Strikes Investing profile picture
@Timothy Stabosz Thanks for the other suggestions as well. I'm particularly interested by DWSN. I might try and write that one up next.
No Called Strikes Investing profile picture
@Carleton Hanson And there is the insider buying, almost right on cue: www.sec.gov/...
Jamm Systems profile picture
Great article as always, Carleton! I have a decent little position in this one.

I hope I'm right to be impressed by Richard Heo, the CEO. Fascinating guy. PhD in Chemistry from the University of Houston, but very strong background in business development. Unusual combination. But.... he was a senior guy at CB&I, and then at McDermott, and we all know what happened at McDermott, and also the role of CB&I in that outcome. And Heo was near the center of it all. So I'm just not sure about what all that means- McDermott was a disaster.

One would hope that he didn't have any role in the financial disaster of McDermott, and that he merely learned from the experience. And that he is extra motivated because he has something to prove at GIFI.

He had responsibility for 18,000 employees at McDermott- not quite the same as at GIFI! It's hard to go from being a big deal at a huge company, where you're more focused on process and politics, to having responsibility for turning around a (relatively) tiny business. To succeed at GIFI, he'll need to be entrepreneurial, self-reliant, and able to do more with less. Not many people can make that transition from huge company to small.

He's certainly taken a good first step. I'm long, and can't wait to see what will happen here. But for sure the outcome isn't certain.
No Called Strikes Investing profile picture
@Jamm Systems Thanks for checking out the article. It is definitely a different situation for Heo at GIFI in terms of scale and responsibility. I am optimistic based on what I have seen so far though. I think he has correctly assessed GIFI's strengths and weaknesses and made some big moves to make the company smaller in the short term. I would think the temptation for new leadership would be to try and grab more revenue wherever they could find it, which probably would have meant growing the shipyard division rather than winding it down. Management assessment is always a bit subjective though, and to your point time will tell how well Heo is able to do; I certainly acknowledge turnarounds aren't easy. That being said the stock is trading cheaply enough to build in some margin of safety; even if they flounder and fail as a company over the next two years and have to liquidate, I think investors would still come out okay in that scenario.
Bryan Shealy profile picture
Hey nice to see an update on this one. I am curious though what exactly their focus is now that they have sold their shipyards for fabrication. Do they just do repairs now? I'm trying to decide whether or not to double down on this one.
No Called Strikes Investing profile picture
@Bryan Shealy Thanks for checking out the article. They are still looking to grow the fabrication division by targeting onshore oil and gas pipeline projects. They will continue to look for offshore fabrication work if/as it is available, but are looking to enter new fabrication markets that include onshore LNG projects. From the last conference call:

"we are beginning to see an increase in project bidding opportunities with LNG and petrochemical activity picking up in Texas and Louisiana with some prospects projected to be awarded in the back half of 2021"
Bryan Shealy profile picture
@Carleton Hanson hmmm sounds like they are talking about all those plastics facilities that the LNG companies are building.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
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.