MRM - MMA Offshore

[Faramir]

Thank you skc, luutzu and shouldaindex for yoir comments. Another big drop today. Definitely staying away.

 

[ThirtysixD]

I had a good read through financials today and came to the conclusion that MRM is most likely finished.

I will be surprised if they do not breach covenants soon. In the event of a liquidation less than 20% of book value is much more realistic (i.e debt wont even be paid off)

 

[luutzu]

I had a good read through financials today and came to the conclusion that MRM is most likely finished.

I will be surprised if they do not breach covenants soon. In the event of a liquidation less than 20% of book value is much more realistic (i.e debt wont even be paid off)

stop, you're scaring me

You read the 2015 Annual report right?

 

[skc]

stop, you're scaring me

You read the 2015 Annual report right?

If you have time, could you do a valuation of MRM using your DangInvestor service... both now and 2 years ago?

I am interested to see what the calculator shows.

 

[luutzu]

If you have time, could you do a valuation of MRM using your DangInvestor service... both now and 2 years ago?

I am interested to see what the calculator shows.

Will do. But let me finish loading first, I'll be more convincing then And it'll be more bang for our entertainment buck too.

Regarding the new capex for the 5 newbuilds. It's a good strategy, bad timing but we can't all predict the future and I imagine these ships tend to take a couple of years' lead time to design and build... But good strategy in that MRM moves towards more specialised vessels, which will give it a greater competitive advantage; with regards to the two PSV for INPEX... it was specified by the client and will be contracted for 5 years term once delivered, with a further 10 years options.

Interesting to note that payment by MRM on these 5 alone is somewhere around $200M. Compare that to its entire market cap of $90M?

The NTA at $2.10 ps is post the $120M impairment charge; add that back and it'd be $2.40 ps.

While impairment charges might be legal, it's not exactly them taking the sledge hammer or the torch to these assets right?

But let's assume there will be further impairment in FY16, bringing it down to $1.00 ps... 4 times current price?


We all know that... critical question is whether MRM will survive the coming winter, then the summer drought. Not breaking its debt covenant and forced to do a Santos. I'm happy that it can.

 

[Wysiwyg]

The NTA at $2.10 ps is post the $120M impairment charge; add that back and it'd be $2.40 ps.

But let's assume there will be further impairment in FY16, bringing it down to $1.00 ps... 4 times current price?

In a controlled sale and especially a firesale, tangible assets would unlikely be realised at the perceived value. Valuers are a sketchy lot.

 

[luutzu]

In a controlled sale and especially a firesale, tangible assets would unlikely be realised at the perceived value. Valuers are a sketchy lot.

Yea, agree that it's not the best time to sell assets. But vessels has a global market compare to, say, trucks or cranes where you can only sell within the landmass. With ships, just send a small crew and deliver it cheaply anywhere.

So might not be as bad as the miners or mining services companies in a fire sale.

Also quickly looked up a few similar vessels like MRM's and they're advertised at around $10M US... those were older vessels than MRM's on average.

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I've looked at its ability to keep going and pay its due... it's in a pretty good financial position given the downturn. It's not going to go broke.

Business is bad, will get worst next year or two... but that's why it's shares goes for so cheap. If it's all blue skies it won't be at this fire sale price.

Another potential we might forget is MRM being a takeover target, or management buyout. Great opportunity for a strategic buyer wanting to expand into SEAsia and Australia for cheap.


So as a going concern I'm fine with its business and financials; as a potential target it might be looking very tasty.

Could be wrong and get stuffed on this for a while, but then you can't really just ignore your approach when it said go for it.

Investing is not as easy as it look.

 

[luutzu]

Some thoughts on MRM's financial position and why I believe it would do alright despite the expected decline in offshore Exploration and Construction.

Managed to get some today at 22 cents, so a good gain. But had also bought some at 45 cents though managed to averaged it down to 28 cents so am happy with it; Also got some for meself and me brother at 40 cents last Friday before the big drop this week... had a pleasant time explaining to him and his girlfriend why I can't see the drop to 30cents on Tuesday... probably won't see her again until... maybe never

But the 3 directors had bought about 1.8M shares at around 24 cents so maybe it would work out fine, maybe... they did also bought in at $1.50 last year.

----

The main objective is not so much to estimate MRM’s earning power, though that will be done when we put an estimate on its value. Aim is to see if this mermaid will survive the winter.

MRM's Solvency:
At first glance, there are signs of deterioration in MMA's ability to meet its current liability (that is, whether or not it could pay its current obligations without the need to sell long term assets). This can be seen in Solvency chart (tab1.1) where the cash, quick and current ratios show a sharp decline from 2014 to 2015.





Taken at this first glance and we can comfortably conclude that MMA is in fairly good shape at the 2015AR:
- Cash Ratio of 0.55 is inline with 2012 and 2013. We ought to ignore 2014 as new debt and new equity were raised for the Jaya acquisition.
- Quick & Current Ratios of 1.47 to 1.49 show good financial strength. While its previous years' range of 1.8 are better, anything above 1 is fair, anything above 2 show lack of opportunities to invest.

Though condition is expected to further deteriorate into 2016 FY as the 2015 FY only captures some 7 months into the oil crash of late 2014; MMA's financial strength and solvency is not expected to deteriorate to alarming levels.

First, 2015 saw final payment of $112M towards the newbuilds; If we look at the notes and were to redefine liabilities under Unearned revenue of $38M and deposits received $5.9M, bringing this $44M into current assets or remove it from liability will show very healthy Solvency ratios.

That while these $44M are technically liabilities, they're really advanced payment... ones that could be argued as an asset since the cost to deliver on them might actually be cheaper given the low oil and new enterprise/wage pressures that could be extracted by MRM.
But leaving these adjustment aside, Altman's Z does not show financial distress (it might get there if newbuild Capex were to continue), and Beneish's M do not show manipulation of earnings - with probability of manipulating decreasing in 2015 to 0.16%.



Debt, Capital Structure & Debt covenant

Capital Structure (Tab 2.1) further support the company' sound financial position.
With debt ratio showing slight improvement from 2014 to 2015 (from total debt/total assets of 46% down to 45%).

While this mean that 45% of MRM's capital is currently funded by debt, note that this figure is post the $120M non-cash impairment on its long term assets, and is only 3% to 4% higher than the debt ratio back in 2012-2013 years where the banks and lenders would use to determine the 3.3% interests on the loan they made to MRM.

If we were to add back the $120M non-cash impairment, debt ratio would then be 43%. So the bankers could be convinced to not call on a fire sale of assets.

When we remove the non-interest bearing liabilities (unearned revenues and deposits) from the equation, the interest-bearing debt ratio is a healthy 36% (pink line).




Cash Conversion
A further support MRM's strong financial and operating position can be seen in how many times EBIT, its operating profit) could cover interests and lease expenses.

As Graham and Meredith advised, industrial companies should have its EBIT covering interests expense by at least 2.5 to 3 times. Looking at the ICC chart (tab 2.2) we can see that while Net Operating CF coverage has improved from 5.44 times in 2014 to 10.03 times in 2015, EBIT coverage declines from 8.8 to a less comfortable 3.8 times.

At first glance this decline in EBIT coverage of interests indicate a bleak future, one that will be much darker given the downturn in Australian Oil and Gas exploration and construction activities. However, this figure is misleading.

EBIT in 2015 includes the non-cash impairment of $120M, also include some $112M in final payments for the new build to be delivered at end of calendar 2015 and March 2016... the coverage next year, with the expected headwinds, would still be comfortable.

 

[skc]

Thanks for the analysis luutzu... a few comments:

First, 2015 saw final payment of $112M towards the newbuilds;

According to MRM's investor presentation on 18/8/2015, there is a further $130m capex remaining for newbuilds in FY16. FY15 balance sheet showed cash ~$125m, so all of that would be used in FY16 for the committed capex.

Their cash position now (outside of unpaid but committed capex) should be only whatever operating cashflow they can earn since end of FY15, plus any improvement in working capital management they might have achieved.

If we look at the notes and were to redefine liabilities under Unearned revenue of $38M and deposits received $5.9M, bringing this $44M into current assets or remove it from liability will show very healthy Solvency ratios.

That's not the correct interpretation. The $44m in prepayments and deposits are ALREADY in current assets as cash. That's the tenents of double entry accounting. As work demanded by those prepayment is carried out, the amount of the prepayment is reduced... but so is the cash as MRM need to spend cash to carryout the work. Prepayment helps with liquidity but usually not solvency.

While this mean that 45% of MRM's capital is currently funded by debt, note that this figure is post the $120M non-cash impairment on its long term assets, and is only 3% to 4% higher than the debt ratio back in 2012-2013 years where the banks and lenders would use to determine the 3.3% interests on the loan they made to MRM.

If we were to add back the $120M non-cash impairment, debt ratio would then be 43%. So the bankers could be convinced to not call on a fire sale of assets.

The banks are forward looking as much as the market. Back in 2012-13 they were looking at earning growth and healthy cashflow. So just because they were comfortable with the debt ratio back then doesn't mean they are comfortable with the same debt ratio now. The trajectory of the debt ratio is totally opposite.

As Graham and Meredith advised, industrial companies should have its EBIT covering interests expense by at least 2.5 to 3 times. Looking at the ICC chart (tab 2.2) we can see that while Net Operating CF coverage has improved from 5.44 times in 2014 to 10.03 times in 2015, EBIT coverage declines from 8.8 to a less comfortable 3.8 times.

At first glance this decline in EBIT coverage of interests indicate a bleak future, one that will be much darker given the downturn in Australian Oil and Gas exploration and construction activities. However, this figure is misleading.

EBIT in 2015 includes the non-cash impairment of $120M, also include some $112M in final payments for the new build to be delivered at end of calendar 2015 and March 2016... the coverage next year, with the expected headwinds, would still be comfortable.

What figure are you using for EBIT? Per management presentation, FY15 EBIT was $87m before impairment. Payment for newbuild is also NOT included in EBIT (it simply gets capitalised into PPE on the balance sheet).

The newly announced EBITDA for FY16 (the full year) is only $75-85m, with low visibility for the second half. This means that MRM will report an EBIT loss for FY16, which throws your EBIT coverage guideline out of the water. Let's say they hit their EBITDA target (a big IF), we are looking at a net debt / EBITDA ratio of some 3.9x for FY16. How does that compare to Graham's guideline?

This is a good article summarising MRM's situation in a forward looking manner, and I draw your attention to this

Visibility regarding customer expenditure plans remains poor as a low oil prices put pressure on day rates and margins are squeezed, Morgans observes. The broker believes, as a number of high volume contracts roll off in the second half, the balance sheet is coming under renewed stress.

These contracts include services to Technip for the Wheatstone LNG project and the high-revenue Silja Europa accommodation vessel for Gorgon. While the company has been awarded a new contract by Woodside Petroleum ((WPL)) for three vessels to support production at the North West Shelf, Pluto and AusOil assets, Morgans does not believe this will be enough to lift the company's domestic utilisation rates meaningfully from the current 61%.

Some thoughts on MRM's financial position and why I believe it would do alright despite the expected decline in offshore Exploration and Construction.

Best of luck. Looking at your analysis, I'd suggest a quick review to see if some of the figures (both historical and forward looking ones) are indeed correct and still supportive of your thesis. As I said... there is potential, and there is the danger of total loss (and there's a range of outcome in between). And I would size my investment accordingly (and certainly not involve my brother's girlfriend unless I hate her).

 

[luutzu]

Thanks for the analysis luutzu... a few comments:

According to MRM's investor presentation on 18/8/2015, there is a further $130m capex remaining for newbuilds in FY16. FY15 balance sheet showed cash ~$125m, so all of that would be used in FY16 for the committed capex.

Their cash position now (outside of unpaid but committed capex) should be only whatever operating cashflow they can earn since end of FY15, plus any improvement in working capital management they might have achieved.

Must have missed the additional $130M capex for FY16. Probably thought the $120M investment Weber was on about in his June 2015 Morgan Stanley prez with the "final" payments of $112M in the 2015AR... So good call there skc... but I am still right though - margin of safety and the new work these goes into.

There were 6 new builts, one of them got sold (probably in the 2015AR to the client for, from memory, around $42M... I couldn't find where it was stated, but pretty sure about that figure and sales).

Of the 5 new builts, the two Platform Service Vessels (PSVs, Plover and Brewster) will be delivered March 2016 and head into an initial 5 year contracts with INPEX (slide 9, June 2015 MS prez). This contracts have 2 extension options, bringing the revenue from $160M to potential $500M over next 15 years.

The MMA Privilege (delivered Aug 2015) was part of the Jaya acqusition and has gone into service in Mexico on 3 year contract.

Leading offshore energy services provider, Jaya Holdings Limited, announced the long term charter of its first high-specification Multi-Purpose Maintenance and Accommodation Vessel (MPMAV) “Jaya Privilege”...

Jaya Privilege will commence her charter on delivery and is expected to operate in Mexico for a period of up to three years. She will be the first vessel of her kind in that market and the third from Jaya in Latin America...

http://worldmaritimenews.com/archives/91252/jaya-wins-charter-contract-for-mpmav-jaya-privilege-in-mexico/

So 3 of 5 new, high-spec vessels have found work.

The 2 new Support Vessels (MMA Pinnacle & MMA Prestige) under construction at MMA’s Batam Shipyard and be delivered by Q3 FY2016 have yet to find work. BUT, these two aims at the inspection and maintenance market - one MMA's management is probably right about its growth given major projects offshore are coming online and needing these work for the life of its platforms.

So if we look at the new builts and the capex that has been and are to be spent on them, they were not really a mistake and not even bad timing.

Sure the contracts with them might have been renegotiated and rates reduced etc., but they are not idle and are not heading for the scrap yard.


If we look at the potential new work MMA is bidding for in the Australian market alone (slide 15, Aug2015 presentation you mentioned)... all hope is not loss yet. I mean the new $50M contract with Woodside aren't even mentioned on that list.

With strong operating cash flow, a couple new jobs so far this half, potentially winning a couple more in H2... and some $50M vessel sales they're targeting (of which $22M has been signed and sold)... Then add to that the cold and warm stacking of vessels that will reduce capex, new agreement with employees etc...

Cash wise I'm happy with MMA's position next couple of years - this under assumption that oil will remain low and no new investment greenlighted.

That's not the correct interpretation. The $44m in prepayments and deposits are ALREADY in current assets as cash. That's the tenents of double entry accounting. As work demanded by those prepayment is carried out, the amount of the prepayment is reduced... but so is the cash as MRM need to spend cash to carryout the work. Prepayment helps with liquidity but usually not solvency.

I know a bit about double entry accounting. Did you know... I spent an entire year re-reading the stuff then design the database architecture for data entry of these statements and wrote the algorithm that churn out all the financial ratios and measures? Pretty scary ha?

Your interpretation is correct, of course. But that's the accounting interpretation, not the business interpretation.

I think I said in the original that such liability can now be met at cheaper rates for MMA. Lower oil/fuel costs, nervous employees wanting to impress the boss while they're trying to figure out who to cut; idle ships put to use etc. So yes, it will cost MMA to deliver on those unearned revenues and deposits, but the margin can arguably be higher.

If the costs to MMA's deliverables has gone up, then yes it'd be stuffed. But here it's gone down and in business the smaller guys and the employees get the rawer deal. The buck doesn't just stop with MMA but rolls downhill.

The banks are forward looking as much as the market. Back in 2012-13 they were looking at earning growth and healthy cashflow. So just because they were comfortable with the debt ratio back then doesn't mean they are comfortable with the same debt ratio now. The trajectory of the debt ratio is totally opposite.

I think I've covered debt ratio and capital structure pretty well in previous post. Even said that the 2016AR will probably show greater deterioration since 2015AR only have some 7 months impact of oil crash (see chart 2). If we look at chart 3, net operating cash is very positive. So I believe management when they say they're still within the banks covenants.

What figure are you using for EBIT? Per management presentation, FY15 EBIT was $87m before impairment. Payment for newbuild is also NOT included in EBIT (it simply gets capitalised into PPE on the balance sheet).

I don't take any results from management report or presentation. Just entered the financial data and it's all done for me

The figure I got is $90.98M EBIT. Close enough.

The newly announced EBITDA for FY16 (the full year) is only $75-85m, with low visibility for the second half. This means that MRM will report an EBIT loss for FY16, which throws your EBIT coverage guideline out of the water. Let's say they hit their EBITDA target (a big IF), we are looking at a net debt / EBITDA ratio of some 3.9x for FY16. How does that compare to Graham's guideline?

Graham advised to not take any one year's figure seriously. If we use the same ratios on that EBITDA of $75-$85M, earnings for 2016 pre-impairment, again, would be around $25M. Let say that's its earnings for coming two years... that's 3.6 times earnings at $0.25 cents? We're not happy with that kind of bargain?

If we assume MRM could survive next couple of years from its operating cash flow - chances are it could; and if it it cannot and need to sell a few vessels to get by... bringing its assets and debt down to, say, entire assets/capital of $1B... then if we dream of life getting back to where earnings return 7% to then the great years of $17% on average capital.. .that's $70 to $170M per year.

So yes, risky and foggy future... but under worst case scenario, its earnings and hence value as a going concern is still decent. Under a sweet dream scenario its one year earning almost twice its current market price.

On an asset value... forget about it.

This is a good article summarising MRM's situation in a forward looking manner, and I draw your attention to this

There's nothing new in that article. Beside committing copyright infringement and actually bootlegging it off as actual, original research when it merely is just rephrasing what MRM has released and shown in its presentations... it just says and predict nothing.

MRM had said utilities of vessels will be low, margin squeezed... heck, MRM even went further and are more pessimistic than that Morgans article.

If we want to look forward, we can't simply look to the bad and ignore the potential good. Vessels are going to be sold off.. that's what you do when you acquire a bunch of them from a competitor - you rationalise inventory and cut overheads and admin costs. Sure the market condition make the sales tougher and mean more are need to goes on auction... but that's business, you can't expect any corporation to go smoothly and never make a bad call or a badly timed decision (in hindsight).

MRM is in a tough position, it's bad, will get worst... but how bad? Going broke bad? Have all $800 million of its vessels going to the scrap heap bad?

That's where judgment and guesses comes in I supposed. Let's hope it turn out well.

Best of luck. Looking at your analysis, I'd suggest a quick review to see if some of the figures (both historical and forward looking ones) are indeed correct and still supportive of your thesis. As I said... there is potential, and there is the danger of total loss (and there's a range of outcome in between). And I would size my investment accordingly (and certainly not involve my brother's girlfriend unless I hate her).

I didn't involve my brother's gf. It was his money, still is his since I paid the guy... they have this what's his is also hers thing going on, hahaa... didn't realised until I was called up. She's fine... I'd be nervous too if my partner just put in some savings and next week it goes halved.

 

[McLovin]

I know a bit about double entry accounting. Did you know... I spent an entire year re-reading the stuff then design the database architecture for data entry of these statements and wrote the algorithm that churn out all the financial ratios and measures? Pretty scary ha?

Your interpretation is correct, of course. But that's the accounting interpretation, not the business interpretation.

I think I said in the original that such liability can now be met at cheaper rates for MMA. Lower oil/fuel costs, nervous employees wanting to impress the boss while they're trying to figure out who to cut; idle ships put to use etc. So yes, it will cost MMA to deliver on those unearned revenues and deposits, but the margin can arguably be higher.

If the costs to MMA's deliverables has gone up, then yes it'd be stuffed. But here it's gone down and in business the smaller guys and the employees get the rawer deal. The buck doesn't just stop with MMA but rolls downhill.

Have their costs actually gone down or are you just speculating? I'm finding it hard to follow what you're saying. Do I understand you've reclassified a liability as an asset? If so have you removed the cash at bank asset that is the contra to the liability? If not you've really just created something out of thin air.

 

[luutzu]

Have their costs actually gone down or are you just speculating? I'm finding it hard to follow what you're saying. Do I understand you've reclassified a liability as an asset? If so have you removed the cash at bank asset that is the contra to the liability? If not you've really just created something out of thin air.

Speculating. There are some grounds for that though.

$44M liabilities from unearned revenue and deposits. These could very well be from the new Chevron contract they just won in June 2015 (again, speculating)... But given the nature of MRM's business - put crew on the ship, fill the tank and take it out to work... It is not unthinkable that these costs has come down from those $44 mill costs (and profit) to carry them out.

In the 2015AR, there are talk of new Enterprise Agreement in place then, and from presentation in Aug. I remember new ones are being negotiated. These will presumably reduce MRM's labour costs.

With Fuel going down, labour down, ships idling that will be use now or could be sold... Such liabilities are only technical and arguable an asset more than a liability.

But the above interpretation are just one small bit in my analysis above. It was a throw away.

Putting that liability back, or leaving it as it... and I have argued that MRM's debt ratios etc. are sound.

Yes, it will get worst in FY16 when the full impact of oil crash will force the oil guys to cut back on capex etc. But will that sink MRM? I don't think it will.



----

You guys are right that yes, liability is a liability and we can't turn it into an asset and make assumptions that they are assets etc. In an accounting sense, yes we can't be that creative. In a business sense we can.

Say receivables... it's an asset but until it's paid and is in our account, it's not really an asset - it's somebody else's assets. Same with liability... more so in this case for MRM.

I run a small business and I never consider deposits or prepayment as liabilities.. it's just cash I could use first, and know I can keep whatever was my margin and use the rest to deliver the goods when they're due.

---

At the end of the day, the decision to invest in MRM or not comes down to its assets.

MRM has $790M in vessel assets - after the $100M vessel impairment charge. The entire company goes for $90 to $150M...

Assumes the bank calls and MRM need to sell some to meet its debt covenant on the $450M LT debt... Its assets will not go down to below $200M. Its newbuild alone costs $122M; the average age of its vessels are around 3 to 5 years old... these vessels could last 20 years easy.





I could be wrong but live and learn they say

 

[skc]

Thanks for your detailed response and robust discussion. My apologies in advance that I will not be able to spend enough time to give you another response of great detail. It just feels to me that you have either used some wrong numbers, or perhaps just confusion over the wording of your post vs the actually analysis.

One example is EBIT number used. First you said

EBIT in 2015 includes the non-cash impairment of $120M, also include some $112M in final payments for the new build to be delivered at end of calendar 2015 and March 2016... the coverage next year, with the expected headwinds, would still be comfortable.

Then you said

The figure I got is $90.98M EBIT. Close enough.

This $90.98M figure does NOT include non-cash impairment and does NOT include payment for new builds. So what you first said is not correct.

Another example regarding pre-payment. First you said

If we look at the notes and were to redefine liabilities under Unearned revenue of $38M and deposits received $5.9M, bringing this $44M into current assets or remove it from liability will show very healthy Solvency ratios.

Then you said

I think I said in the original that such liability can now be met at cheaper rates for MMA. ...So yes, it will cost MMA to deliver on those unearned revenues and deposits, but the margin can arguably be higher.

It's one thing to assume that the prepaid work can be done at a higher margin (not guaranteed without knowing the contractual terms), it is completely wrong to say that you can just remove it from the liability or move it into the current asset. The balance sheet impact from slightly higher margin earned on $44m of work is much smaller.

Last example is on your earnings...

If we use the same ratios on that EBITDA of $75-$85M, earnings for 2016 pre-impairment, again, would be around $25M. Let say that's its earnings for coming two years... that's 3.6 times earnings at $0.25 cents? We're not happy with that kind of bargain?

Last year, depreciation was = $131m. Even if you allow for some reduction (from assets divested/impaired), it's still a much larger number than the EBITDA forecasted. There is fair chance that MRM will report an EBIT loss, and almost guaranteed to report a negative earnings for the full year pre-impairment. You can't just use the same ratio for earnings / EBITDA in previous years to project this year's figure.

Anyhow, thanks again for the discussion. We have both presented enough for any interested observer to undertake their own further research.

Best of luck with your position.

 

[luutzu]

Thanks for your detailed response and robust discussion. My apologies in advance that I will not be able to spend enough time to give you another response of great detail. It just feels to me that you have either used some wrong numbers, or perhaps just confusion over the wording of your post vs the actually analysis.

One example is EBIT number used. First you said


Then you said


This $90.98M figure does NOT include non-cash impairment and does NOT include payment for new builds. So what you first said is not correct.

Another example regarding pre-payment. First you said


Then you said


It's one thing to assume that the prepaid work can be done at a higher margin (not guaranteed without knowing the contractual terms), it is completely wrong to say that you can just remove it from the liability or move it into the current asset. The balance sheet impact from slightly higher margin earned on $44m of work is much smaller.

Last example is on your earnings...


Last year, depreciation was = $131m. Even if you allow for some reduction (from assets divested/impaired), it's still a much larger number than the EBITDA forecasted. There is fair chance that MRM will report an EBIT loss, and almost guaranteed to report a negative earnings for the full year pre-impairment. You can't just use the same ratio for earnings / EBITDA in previous years to project this year's figure.

Anyhow, thanks again for the discussion. We have both presented enough for any interested observer to undertake their own further research.

Best of luck with your position.

Thanks skc.

English is not my native tongue, haha.

Regarding EBIT... I defined it in the system and have checked those definition so they're good. In the case of MRM they seem to include the depreciation costs in the expense item with vessels and other assets themselves; and for 2015 separate the $120 impairment - where I then define it as a one off. Though this 2016FY may prove it's a two off.

But regardless, in this instance I didn't go through and do the ongoing capex to get to adjusted earnings etc. Focus was mainly on book value.

The situation MRM is in, any capex I could estimate will very quickly be outdated anyway. One, they're selling vessels in a climate where we don't know how many they'd be selling or need to sell; Two, dry docking x number, warm docking y number will throw any estimates of capex off.

But yea, earnings for 2016 and 2017... it'll make money from operations and will report losses from impairment. All I am betting on is I bought it at way below its book value, the stuff it has are new, and a few Asian neighbours may find they'd want some boats to help build a few island in the South China Seas lest the Chinese take all of it

This is why i never gamble or smoke...

 

[Value Collector]

I think this company has a pretty solid future, and is a bargain at the moment, I have been holding since December, and not only do I think it's severely undervalued as it currently stands, but I believe the amount of contracts that will be available in the coming years will make it super profitable.

There is a bit of a game changer coming in my opinion, there is a pipeline that is going to be built that will link Apa's Northern Territory pipeline to their east coast grid via mt isa.

This is significant to MRM, because it will mean the Timor sea gas fields, which are currently practically undeveloped, but have about 3 times the amount of gas than Australia's other giant field the north west shelf, will be able to supply gas into the east coast market and to the LNG plants in Queensland.

I believe this will lead to a boom in activity in this field which Mrm can service, lots of exploration, lots of drilling, lots of pipe laying and lots of rig construction and servicing.

With all the pressure to limit coal seem gas fracking, and a reduction in coal power plants, I think this field will be a great source of gas and Mrm will benefit greatly.

I am happy to hold at the moment.

 

[Value Collector]

I also forgot to mention the second LNG plant that is currently under construction in Darwin, and the assiociated 800km under sea gas pipline that has been built linking the browse basin (which MRM is also active in) to Darwin.

So in summary, we have two enormous oil and gas basins, that are very gas rich and under developed, linked to Darwin which has 1 operating LNG plant and a second under construction, and we also have a project under development that will link Darwin to the east coast cities (Brisbane, Sydney, Melbourne, Adelaide and various regional cities, mines and industries) and LNG plants in Gladstone.

looks like the future is bright for MRM's operations in the north / north west to me.

 

[luutzu]

I also forgot to mention the second LNG plant that is currently under construction in Darwin, and the assiociated 800km under sea gas pipline that has been built linking the browse basin (which MRM is also active in) to Darwin.

So in summary, we have two enormous oil and gas basins, that are very gas rich and under developed, linked to Darwin which has 1 operating LNG plant and a second under construction, and we also have a project under development that will link Darwin to the east coast cities (Brisbane, Sydney, Melbourne, Adelaide and various regional cities, mines and industries) and LNG plants in Gladstone.

looks like the future is bright for MRM's operations in the north / north west to me.

Talking to yourself again VC?

This MRM was quite an eye opener for me. That we could actually get a five to ten bagger without too much gambling

btw, how does the linking Darwin to the east coasts LNG plants benefit MRM?

They're mainly offshore right? Oh wait, linking it mean the need to drill offshore to supply the pipes?

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Look into ANQ buddy. It could either go to zero or a lot a lot more.

 

[Value Collector]

This MRM was quite an eye opener for me. That we could actually get a five to ten bagger without too much gambling

btw, how does the linking Darwin to the east coasts LNG plants benefit MRM?

They're mainly offshore right? Oh wait, linking it mean the need to drill offshore to supply the pipes?

---

Look into ANQ buddy. It could either go to zero or a lot a lot more.

There are two really big offshore gas basins near Darwin, the browse and the Bonaparte, both are gas rich and under developed, the reason they are under developed is because they are considered remote, there is not many gas markets easily available to them.

Linking up the APA's Northern territory gas pipeline to the APA's east coast grid, opens up markets for the gas in these fields, meaning gas can be produced at a higher rate and there fore more exploration, more construction, more drilling and more general platform servicing, MRM benefits by an increase in the available contracts for all of this activity.

The link has been a approved, they went with option 1, linking the NT to the east via mt isa, and incitec have already signed up to buy gas for their fertiliser plant.

Basically the more gas they can sell, the more activity on the fields and the more projects the better MRM will do. Before their market was limited to 1 lng plant and local NT industry, now they have a second LNG plant being built and a connection to the rest of Australia, which includes other LNG plants.

The gas companies will now be able to Gladstone, Brisbane, Sydney, Melbourne, Adelaide, Tasmania and anywhere in between.

Talking to yourself again VC?

I have a habit of it, you never know, maybe a lurker gets value from my posts.

 

[Value Collector]

 

[luutzu]

There are two really big offshore gas basins near Darwin, the browse and the Bonaparte, both are gas rich and under developed, the reason they are under developed is because they are considered remote, there is not many gas markets easily available to them.

Linking up the APA's Northern territory gas pipeline to the APA's east coast grid, opens up markets for the gas in these fields, meaning gas can be produced at a higher rate and there fore more exploration, more construction, more drilling and more general platform servicing, MRM benefits by an increase in the available contracts for all of this activity.

The link has been a approved, they went with option 1, linking the NT to the east via mt isa, and incitec have already signed up to buy gas for their fertiliser plant.

Basically the more gas they can sell, the more activity on the fields and the more projects the better MRM will do. Before their market was limited to 1 lng plant and local NT industry, now they have a second LNG plant being built and a connection to the rest of Australia, which includes other LNG plants.

The gas companies will now be able to Gladstone, Brisbane, Sydney, Melbourne, Adelaide, Tasmania and anywhere in between.

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I have a habit of it, you never know, maybe a lurker gets value from my posts.

That's some good thinking there.

I noticed the new pipe linking gas to the East Coasts but didn't managed to link it to MRM. But yea, I think you're right.

Noticed also that MRM's half-yearly ( I think) report saying how the vessel sales post AR reporting actually fetched higher prices than what management had put on their book value after the $120M write-down that brought its NTA to $2.15.

Add to that the, I think, inevitable need to restart Woodside's Browse (?) FLNG project and the Darwin works you're saying...

If that happen, say in a couple year, oil should improve and we're back in business - able to put those Jaya ships to serious work... woah!

But let's not ahead of ourselves and be happy with $1 a share.