CKH - Seacor Holdings

[rockket]

anyone look at this name? seems like it would be right up the alley of a lot of members here (continuation from the ERA thread http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/era-era-group-(spinoff)/)

 

brooklyn investor had a great writeup that got me interested:

 

http://brooklyninvestor.blogspot.com/2012/05/ckh-seacor-holdings-inc-annual-report.html#comment-form

 

 

would love to get some discussion started. i'm especially interested in the situation in the gulf, knowing very little about it. seems that the moratorium ended in october but little change in price (minus the spin)

 

[JEast]

I love the space, but so do many in the market presently.  I have had my eye also on Bristow Group (BRS) for a few years but ran up on me before I could get comfortable.

 

As a side note, it is just amazing what the US natural gas boom has done to the tanker space. Back when we were all looking for gas plays when the price was below $2, we should have been shorting the tanker space.

 

Cheers

JEast

[watsa_is_a_randian_hero]

I'm in the stock.  Performance is very sporadic and financials are confusing because of so many asset purchases/sales.

 

I bought the stock after grant's interest rate observer did a write-up.  They wrote very favorably of management having an owner/operator mentality.  No forecasts are given, mgmt shuns wall street, focuses on long term performance.  Management buys back a lot of shares.  Furthermore, they made a convincing argument for the stock being a good buy at the time (I think it was trading below book).

 

I have a valuation model that pegs them at $130ish value (for ERA+CKH) assuming that return on fixed assets in the future equals the historical average.  That said, I don't trust my model on this one.  Very difficult to value. 

 

To be honest I'm by no means an expert at their business as there are a lot of moving parts.  However, it is not a large position, I am comfortable with management, and I try not to over think it...I'm not holding because I think its worth $130 and trading at $90...I'm holding because I think its good management and the price is not unreasonable. 

[AchilliesValue]

Positive feature in Barrons http://online.barrons.com/article/SB50001424052748704538604578368473681725076.html#articleTabs%3Darticle

 

This has been on my to do list since I read that Brooklyn writeup but haven't gotten around to doing the work.  Looks very interesting on the surface.

[bigbadwolf]

Stock is down significantly with oil.  Now trading below book.  Q3 figures didn't look great but they bought back about 4% of outstanding shares. 

[JayGatsby]

I have a smallish position (and now smaller than it was). I don't really have a strong thesis other that it seemed like an interesting collection of hard assets with top notch management. Seemed like the construction reserve funds should cover much of the upcoming capex leaving them with the cash on the BS to aggressively buy back shares. Seemed like the investments in subs of 50% or less were pretty much valued at $0. The financial structure is pretty complicated and I haven't spent enough time with it to have a real strong conviction.

[handycap5]

Seacor's 2015 letter is out. I think Chuck is a very clear thinker and writer. It is my favorite one I have read (and I have read a lot of them). I recommend it to anyone thinking about oil, energy, etc.

 

http://seacorholdings.com/pdf/SEA60-AR-Interior_Complete_05032016.pdf

 

[Jurgis]

Great letter. But I think I'll go with Buffett quote on this one: "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact."

 

The business seems to have been crappy for a while now - looking at ROE and other metrics, they have not done well since 2007.

 

It's possible that business will turn around at some point and stock will run up accordingly, but I'll skip.

 

I wish the CEO was running a business with better characteristics. Though of course then the business would be much more expensive.

[JayGatsby]

Down 10% on a poor quarterly report. Will have to dig in more, but valuation seems interesting. In the press release they noted that they bought a few offshore vessels at a liquidation. They also recently sent an unsolicited prepack proposal for Gulfmark Offshore.

[namo]

The press release is a great read: yet another detailed post mortem + outlook on the business. He expects a terrible winter.

Buying it at maximum pessimism ought to be good, but are we there yet?

[DooDiligence]

Would anyone be interested in photos of all the boats tied up in Fourchon (it's been like a parking lot for over a year now...)

 

I'm just a lowly boat driver but can't imagine any of these so called hard assets going for more than $0.25 on the dollar & that would be if you caught someone with a bagfull of money drunk & just dieing to get in the business...

 

The monster in the industry is privately owned & has crews ready in the event contracts start popping up (the more people you lay off in relation to the number of boats you operate will play an important part in whether you can put assets into play if & when the time comes.)

[gfp]

Just curious dooDilligence, do you live in Louisiana?  What firm are you a captain with?  Is the monster in the industry that you referred to Edison Chouest or someone else?  I'm not real familiar with this industry but I do enjoy the racetrack the other Chouest brother spent so much money on.  Thanks, gfp (new orleans)

[DooDiligence]

Just curious dooDilligence, do you live in Louisiana?  What firm are you a captain with?  Is the monster in the industry that you referred to Edison Chouest or someone else?  I'm not real familiar with this industry but I do enjoy the racetrack the other Chouest brother spent so much money on.  Thanks, gfp (new orleans)

 

No I don't & yes it is (hope I haven't posted anything they'd fire me for...)

 

That was Laney I believe with the racetrack.

[gfp]

Yes, Laney likes his Ferraris.  An expensive hobby, that track - certainly not profitable / self sustaining.  Back to the offshore business, I've had quite a few friends leave that industry lately, many from Hornbeck.  The engineers tend to go on to find work on Billionaire's yachts, which seems like a fairly easy if boring way to make a living.

 

Just curious dooDilligence, do you live in Louisiana?  What firm are you a captain with?  Is the monster in the industry that you referred to Edison Chouest or someone else?  I'm not real familiar with this industry but I do enjoy the racetrack the other Chouest brother spent so much money on.  Thanks, gfp (new orleans)

 

No I don't & yes it is (hope I haven't posted anything they'd fire me for...)

 

That was Laney I believe with the racetrack.

[DooDiligence]

Yes, Laney likes his Ferraris.  An expensive hobby, that track - certainly not profitable / self sustaining.  Back to the offshore business, I've had quite a few friends leave that industry lately, many from Hornbeck.  The engineers tend to go on to find work on Billionaire's yachts, which seems like a fairly easy if boring way to make a living.

 

Yeah; I know a few wheelhouse guys who are picking out wine & foi grois on yachts now.

 

I've read a lot of your posts & we think similarly on many issues (you seem more well versed on finance but I'm learning...)

 

BTW I live in Florida & travel to south LA for work.

[Mr Pink]

Hey DD, sounds like you bring an interesting perspective to this so thanks for chiming in!  Would love to hear your thoughts on a topic if you have any: mgmt teams frequently talk about how new and shiny their ships/features are (DP2 or 3, etc.) - how much do you think that stuff seems to matter in a tight/loose market?  Do you think customers really care/pay any premium for those features/new ships?  What advantages do you think newer ships (Anchor or Supply or Anything) really have over "old" ones these days?

 

Thanks!

[DooDiligence]

Hey DD, sounds like you bring an interesting perspective to this so thanks for chiming in!  Would love to hear your thoughts on a topic if you have any: mgmt teams frequently talk about how new and shiny their ships/features are (DP2 or 3, etc.) - how much do you think that stuff seems to matter in a tight/loose market?  Do you think customers really care/pay any premium for those features/new ships?  What advantages do you think newer ships (Anchor or Supply or Anything) really have over "old" ones these days?

 

Thanks!

 

Adoption of ISM (International Safety Management) systems & converting vessels to SOLAS (Safety of Life at Sea) standards (and the subsequent ISO certifications) did more to attract higher day rates & long term contracts with bigger (Exxon, Chevron, etc.) companies than anything else IMHO.

 

This started happening in the late 90's & Chouest was in the vanguard which gave them a huge lead on competitors.

 

I operate a DP2 vessel with a dynamic positioning system which is designed, installed & maintained by a Chouest owned company (HOS & others use mostly Konigsberg or to a lesser extent Beier & they all provide a similar level of position keeping capability with differing user interfaces.)

 

Shiny new ships mean something of course but there are so many of these to choose from that it's all about day rates & the ability of an operator to crew up & put the vessel where it's needed.

 

I ran an anchor boat in Brasil from 2011 to 2015 & nowadays, with the advent of DP drill ships & semi submersibles, I believe that anchor vessels will mostly be used for setting suction pilings, wet towing pipelines & many will be repurposed for various subsea & surface jobs.

 

This is such a capital intensive business with so much overcapacity that I'd have a hard time putting my money in any boat company (not sophisticated enough to look at debt either.)

 

I missed the opportunity to short GOL & HOS & Tidewater but then I've always preferred owning something I like over hating on something I don't.

 

I just finished Buffets Rules & it's inspired me to start looking for Generals, Workouts & Controls so we'll see if I'm any good at it.

 

As of now my only energy commitment (besides my job) is Vanguard Diversified Energy which I got when oil hit $30 (telling people on this forum about it is kinda like showing up at a party with a nice chick who's extremely plain & overweight - I know it's gonna turn out good for me but kinda embarrasing - I like her & am looking for a REALLY ugly one that'll probably embarrass me even more...)

[JayGatsby]

Not sure what to make of this: https://seekingalpha.com/pr/16829474-seacor-holdings-inc-declares-spin-dividend-seacor-marine-holdings-inc-shares

Here's the original investment: http://www.bizjournals.com/southflorida/news/2015/11/30/carlyle-group-to-fund-seacor-marine-subsidiary.html

 

Either 1) the offshore market is so massively overbuilt and the losses are so large that by ditching it they can improve the overall Seacor, or 2) the offshore market is so massively depressed with assets selling at pennies on the dollar that they'll have greater opportunities to capitalize on that as an independent entity.

 

It will certainly improve short term results at Seacor Holdings to separate... something to watch. ???

[handycap5]

I also note strangely that Chuck didn't seem to write an annual letter this year, at least that I could find...

[DooDiligence]

WB mag suspends utilization & day rate reporting (last I heard a 280 mud boat was going for $6K a day)

 

https://www.workboat.com/resources/reports/2016-day-rates/

 

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What are your thoughts on this SA writeup?

 

https://seekingalpha.com/article/3961416-spin-seacor-marine-holdings-will-destroy-shareholder-value

 

"Offshore Marine Services will probably be forced to pay higher interest costs to obtain capital in the open market. In addition, creditors will require securitization against vessels to minimize loss. This will decrease the flexibility of Offshore Marine Services to stack vessels due to market conditions."

 

Prob doesn't matter since most of the stacking is done by now.

 

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The capital will likely not come from operations unless onshore goes away (hard to compete with such short spud in to production times.)

 

And this is a capital intensive biz (something expensive is always breaking + spending on regulatory & statutory compliance.

 

Most of our safety meetings included attempts to put the gris-gris on shale but have been ineffective to date...

[JayGatsby]

 

What are your thoughts on this SA writeup?

 

https://seekingalpha.com/article/3961416-spin-seacor-marine-holdings-will-destroy-shareholder-value

 

"Offshore Marine Services will probably be forced to pay higher interest costs to obtain capital in the open market. In addition, creditors will require securitization against vessels to minimize loss. This will decrease the flexibility of Offshore Marine Services to stack vessels due to market conditions."

 

Prob doesn't matter since most of the stacking is done by now.

 

---

 

The capital will likely not come from operations unless onshore goes away (hard to compete with such short spud in to production times.)

 

And this is a capital intensive biz (something expensive is always breaking + spending on regulatory & statutory compliance.

 

Most of our safety meetings included attempts to put the gris-gris on shale but have been ineffective to date...

That makes me think maybe seacor is going more with Option 1 (that the offshore market is so massively overbuilt and the losses are so large that by ditching it they can improve the parent Seacor). You'd know better, but it seems like these companies ordered so many new vessels with the goal of expanding so rapidly that even in a world without fracking they still were on a collision course (Pages 24 and 25 here from Hornbeck's 2012 investor pres feature their "Project Spartan" capex program with imagery from The 300: http://www.jefferies.com/CMSFiles/Jefferies.com/files/Conferences/112812/Presentations/Hornbeck%20Offshore%20Service%20VerF.pdf). I'm not sure what changes that for a few years?

 

Counter to that though is just recently Seacor was trying to buy Gulfmark. With Gulfmark and Tidewater both nearing Chapter 11 maybe Seacor is looking to get into the action? Price to book is so depressed that maybe they view it as a buying opportunity.

 

I also note strangely that Chuck didn't seem to write an annual letter this year, at least that I could find...

I don't see an annual report yet... maybe soon? Does seem slow.

[DooDiligence]

 

What are your thoughts on this SA writeup?

 

https://seekingalpha.com/article/3961416-spin-seacor-marine-holdings-will-destroy-shareholder-value

 

"Offshore Marine Services will probably be forced to pay higher interest costs to obtain capital in the open market. In addition, creditors will require securitization against vessels to minimize loss. This will decrease the flexibility of Offshore Marine Services to stack vessels due to market conditions."

 

Prob doesn't matter since most of the stacking is done by now.

 

---

 

The capital will likely not come from operations unless onshore goes away (hard to compete with such short spud in to production times.)

 

And this is a capital intensive biz (something expensive is always breaking + spending on regulatory & statutory compliance.

 

Most of our safety meetings included attempts to put the gris-gris on shale but have been ineffective to date...

That makes me think maybe seacor is going more with Option 1 (that the offshore market is so massively overbuilt and the losses are so large that by ditching it they can improve the parent Seacor). You'd know better, but it seems like these companies ordered so many new vessels with the goal of expanding so rapidly that even in a world without fracking they still were on a collision course (Pages 24 and 25 here from Hornbeck's 2012 investor pres feature their "Project Spartan" capex program with imagery from The 300: http://www.jefferies.com/CMSFiles/Jefferies.com/files/Conferences/112812/Presentations/Hornbeck%20Offshore%20Service%20VerF.pdf). I'm not sure what changes that for a few years?

 

Counter to that though is just recently Seacor was trying to buy Gulfmark. With Gulfmark and Tidewater both nearing Chapter 11 maybe Seacor is looking to get into the action? Price to book is so depressed that maybe they view it as a buying opportunity.

 

I also note strangely that Chuck didn't seem to write an annual letter this year, at least that I could find...

I don't see an annual report yet... maybe soon? Does seem slow.

 

The new builds were crazy (seemed like every week some lucky relief Captain was getting a Master's spot on a brand new boat.)

 

My ex-company bought Tampa Shipyard & Bollinger & built out others in MS, LA & Brasil & pumped out hulls for the past decade.

 

I haven't read the Jeffries report but will now...

[JayGatsby]

Small distribution, but should be accretive: https://seekingalpha.com/pr/17012853-seacor-holdings-inc-declares-distribution-dorian-lpg-ltd-shares-stockholders

 

[DooDiligence]

This is an interesting discussion between GOM mariners from early 2015.

The 1st part discusses wages & has a considerable amount of pissing & moaning but it gets better and gives some good industry scuttlebutt.

 

http://forum.gcaptain.com/t/chouest-gives-employees-the-shaft/14291

 

For the record; I owe my current situation to the Chouest family, and I thoroughly enjoyed my time at GMS (Galliano Marine Service, as Chouest is officially known.) I have nothing bad to say about them.