According to a 13G filed with the SEC, Royce & Associates owns almost 1,250,000 shares of Seacor Holdings, Inc. (NYSE:CKH). Seacor is a $1.8 billion market cap marine transportation company operating a portfolio of assets including offshore supply vessels, tugboats and pushboats, and tank barges. The stock is down 5% in the last year against a rising market, and down 17% in the last two years. Royce & Associates is a fund managed by Chuck Royce which tends to focus on small-cap and large-cap companies, even if the smaller size of these companies forces the fund to take a large percentage stake. In this case, Royce now owns almost 6% of Seacor’s outstanding shares. See more of Royce’s stock picks; earlier this month, we recorded filings from Royce disclosing larger positions in Enersys, Brady Corp, and Molex.
Seacor’s revenue was down in the third quarter of 2012 from the same period in the previous year, but this was entirely due to lower revenues from commodity trading related businesses; the company’s core transportation business actually improved. Seacor Holdings, Inc. was also able to reduce its operating costs with the result being a 22% increase in operating income. The company experienced an even higher growth rate in terms of earnings, reporting $16 million in net income versus $4 million a year earlier. This built on a successful first half of the year, resulting in earnings more than doubling in the first nine months of 2012 compared to the first nine months of 2011.
13F filings for the third quarter of 2012 reveal that Kensico Capital, managed by Michael Lowenstein, increased its stake during that period by 24% to a total of about 720,000 shares (find more stocks Kensico was buying). Marty Whitman’s Third Avenue Management also reported a significant position in Seacor, at about 540,000 shares. Check out Whitman’s favorite stocks.
Some of Seacor’s peers may be better buys however:
We can compare Seacor to GulfMark Offshore, Inc. (NYSE:GLF), Hornbeck Offshore Services, Inc. (NYSE:HOS), Tidewater Inc. (NYSE:TDW), and Kirby Corporation (NYSE:KEX), which are all involved in the marine transportation business. Hornbeck- which primarily operates offshore supply vessels- is something of an anomaly trading at 32 times trailing earnings, though the company has been experiencing good revenue growth. The other three comparable companies have trailing P/Es between 17 and 19- so they are priced at a discount to Seacor at least on that basis. In general, analyst expectations are for these companies to improve over the next year as well, and Gulfmark and Tidewater stand out for having market caps only 10 or 11 times forward earnings estimates- cheap, if the companies can get there. We would also note that in terms of EBITDA multiples, Seacor is actually the company carrying the premium pricing at an EV/EBITDA of 10 as opposed to the 8-9 range where we find its peers.
Seacor isn’t particularly attractive, but it is at least possible that it will continue its impressive growth performance and even from more of a value perspective Royce may be on to something as far as the industry in general is concerned. If the conditions that would make Seacor a good investment come to pass they should certainly benefit companies such as Gulfmark and Tidewater, which may be in the process of becoming outright cheap if they meet expectations in the next couple quarters. They may make good watchlist stocks.
Disclosure: I own no shares of any stocks mentioned in this article.
