This AIM tiddler could be worth 38% more

Thalassa promised this morning a revised trading outlook following a board meeting Thursday. Clearly, a new contract win with American oil giant ConocoPhillips, confirmed in a separate statement to the stock exchange seconds earlier, is expected to significantly move the numbers.

Investors thought so, chasing Thalassa's share price up as much as 18% to a five-month high, adding around £1.2 million to the AIM-listed marine geophysical services firm's market capitalisation.

But at 47p, house broker WH Ireland thinks there's more to come, repeating its 65p price target. That implies that the shares, which trade on a wide spread, have 38% potential upside from here.

The deal could add £2 million to next year's revenue forecastsIn a brief statement, Thalassa said its WGP subsidiary has won a contract with ConocoPhillips Skandinavia AS to buy seismic data sets on the Eldfisk field in the North Sea in 2017.

The "shoot" - Thalassa's second contract with ConocoPhillips following last year's work on the Ekofisk field - will take about two months and is expected to begin in the second quarter.

According to WH Ireland, and judging by previous contract wins, it is possible today's news has the potential to add about $2.5 million (£2 million) revenue to forecasts for 2017.

It currently has pencilled in $12.5 million of revenue, pre-tax profit of $0.3 million and earnings per share (EPS) of minus 0.6 cents.

For this year, it's $13.9 million, $0.5 million and plus 0.5 cents, respectively.

"Following recent investments, Thalassa is becoming more diversified than purely an oil services play, with our forecasts yet to reflect the potential benefit from LSR," writes analyst John Cummins.

"For WGP, whilst the outlook across the oil services sector is extremely challenging, the fact it has two significant multi-year contracts, and is picking up further work against the current market backdrop, demonstrates the position in the market of both its technology and service proposition.

"ARL [Thalassa's Autonomous Robotics unit] also has significant potential should the development of this disruptive technology prove successful. Following this announcement, we maintain both our 'buy' recommendation and 65p share price target."

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.