Ann: 2023 Financial Results Announcement and Presentation, page-21

Courtesy ,Stoc….d today
MMA Offshore (ASX:MRM)

“MMA Offshore has historically provided shipping services to the offshore oil and gas sector. The sector has been unloved for some time now (the last peak was 2013), with a significant and chronic underinvestment in the space for a decade.

“Yet despite how investors might feel about traditional energy, it is a necessary part of global growth for the foreseeable future.

“Due to the underinvestment in the sector (and corresponding growing demand), companies like MMA have seen a significant increase in demand for their ships. Whereas just a couple of years ago utilisation on a fleet like MMA’s would have been under 60%, the industry is currently running at over 90%. This has meant that MMA has been able to lease out their equipment more regularly, and also demand higher prices for that equipment.

“Historically companies like MMA have traded at as low as 30% of NTA during the worst of the industry cycle – at those prices, investors are simply considering what they might be able to achieve if the company was wound up. Yet, when markets return to boom times, it’s been quite usual for these sorts of businesses to trade at over 2x NTA (at that point investors are concerned with a multiple of earnings).

“Boom times and higher prices have, in the past, brought more competition (which ultimately aids in lowering prices), however we have not begun to see that happen. Indeed, given the current global cultural climate, it would be quite difficult for a new player to enter the energy space and raise (or borrow) the capital to do so.

“MMA is currently trading at a little over 1x NTA, but we like the sectoral exposure, and believe that difficult times are likely to refocus consumers on what are the cheapest sources of energy.

“Additionally, the prospects for offshore wind farms have been significantly touted by industry. MMA would be expected to play a significant part in that growth. Already almost 25% of revenues are driven by renewables, and given the growth trajectory of the space, we’d expect those revenues to grow significantly over the next few years.”

DYOR please.