Razorblades in the Oil Patch from Singapore: OMS Energy Technologies $OMSE
The market is in an interesting place right now. After 2023 and 2024 brought pain and struggle for most small caps, 2025 has brought a lot of valuations significantly off of their lows. Companies like Babcock & Wilcox (BW) which had the potential to be a five bagger or a ten bagger when it was trading around $1 last year, now probably only has the potential to be a double or a triple from the current $3.50 share price.
One strategy is to go even farther down the size and quality spectrum, sell your gold miners and buy gold explorers, for example. Another strategy is to look farther outside of the US, or to go farther out on the risk curve. But with the market having rallied so hard, it’s starting to feel like good ideas are fewer and farther between right now.
Today’s idea comes from Davy or “Blinklebloop” on Twitter, and Archetype Capital on Substack. You can find Davy’s aptly named article on OMS Energy Technologies here:
OMS Energy Technologies (OMSE) is based in Singapore, and they are a manufacturer of precision wellhead systems and steel pipes for the oil and gas industry. There is not a lot of information available on OMSE, prior to 2023, they were a division within Sumitomo. Management led a buyout of the division, and proceeded to grow revenue aggressively by focusing on markets which Sumitomo did not prioritize. While the business unit has been operating for fifty years, they reincorporated fresh in 2023 and speed ran going public. Below a certain revenue threshold, companies can list on the NYSE with only two years of audited financials. But those two years of data which we do have are impressive.
OMS manufactures out of Southeast Asia, ships their pipes and wellheads throughout the ASEAN region, and they even have a significant market penetration in the Middle East and North Africa region. Revenue is up from $57 million in 2022 to $97 million in 2023, $181 million in 2024, and $203 million for fiscal year 2025. OMSE had GAAP positive net income in each of those years, despite being a supplier for the oil and gas industry. Trailing twelve month earnings per share are $1.06 for a company with a $5.07 stock price. And maybe most importantly, in November of 2024 OMSE landed a ten year contract with Saudi Aramco which should be responsible for between $120 million and $200 million of revenue per year going forward, so a decent bit of growth should be baked in to their fiscal 2026.
The balance sheet is clean with no long term debt, and $96 million of current assets in excess of accounts payable. At a market capitalization of $215 million, they are trading incredibly close to 1x price sales, and 4.8x price to earnings. With $64 million of EBITDA and around $120 million of enterprise value, they are trading at less than 2x EV / EBITDA. You can measure it any way you want to, OMS is very cheap. And to have positive GAAP net income in 2022, 2023, and 2024 as an oil services company is very impressive.
So why did this Singaporean steel pipe company go public? There are two primary reasons to be public, exit liquidity, or to facilitate acquisitions. In this instance, the evidence points overwhelmingly toward acquisitions. In their IPO documents, OMSE stated plainly that they are not planning on paying a dividend at any point in the near future, as they are a growth company and all cashflow will be going toward R&D and acquisitions.
This is important because OMSE is a controlled company, with the CEO and Chairman of the Board, How Meng Hock, owning about 62% of the company. He has a lockup period that ends around November 10th, 180 days after the IPO. If the purpose of going public were for exit liquidity, we would see Mr. Hock selling shares aggressively in about two weeks. I don’t believe he will do that based on his desire to grow the business, he is only in his mid 50’s and has only been working on growing OMSE for three years. That is too short a time and too young an age to have hit the growth wall and look for the exit, but we will know for certain in a few weeks.
Why is the stock so cheap? OMSE IPO’d at $9 a share in May, and almost immediately sold off. We were in an oil bear market, and momentum begets more momentum. Not even earnings on September 3rd was enough to reverse the selling, and they had $54 million of revenue and $0.235 of earnings per share for the quarter. But in the last four days, the stock has had a good bit of a bounce. The oil narrative has shifted, even if it proves to be temporary, and for the moment OMSE has found a floor.
There’s not much else to say, OMSE is probably a rollup, although they haven’t made any acquisitions in the five months since they went public yet. There will be no return of capital to shareholders for the foreseeable future until Mr. Hock runs out of worlds to conquer. Those acquisitions should be accretive, it is doubtful Mr. Hock wants to dilute himself unnecessarily. Southeast Asia and the Middle East are probably the two hottest growth regions of the world, and with Sumitomo’s R&D, OMSE is aggressively landing contracts. The company has inventory and receivables in excess of liabilities, and another $75 million of cash for good measure. Operating cash flow was $40 million last year, and the company sells for $215 million. And at some point in the next couple of years, the oil market should be in a secular boom, as opposed to these last two years, during which OMSE was still profitable.
What kind of reasonable price target should I put on OMS Energy Technologies? The stock price will go through two phases. In the initial phase, the multiple might stay near the 5x price to earnings ratio where it sits today, but revenue will grow organically and through acquisitions. Only after management implements some policy of returning capital to shareholders would I expect a multiple expansion to a price to earnings ratio higher than 10x. If Mr. Hock brings OMSE to $400 million of annual revenue, $80 million of annual net income, and a price to earnings ratio of 10x, that would imply a $20 stock price. Can he do that within three years? I think ha probably can. If the commodity supercycle hits oil next, all the better.
OMS Energy Technologies (OMSE) $5.07: $20 by the end of 2028
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