Chart Of Thalassa Holdings

They say that time is the friend of a great business but the enemy of the mediocre. While that statement has a pervading ring of truth to it, the sagely quote excludes commodity businesses with a high probability of self sustenance and mean reversion into the future. Can I tweak that to say time is the friend of those companies that can survive an industry downturn?

The focal point of this article is my accidental discovery of a company which operates within the energy services sector. Its name is Thalassa Holdings. The holding company is a supplier of services and equiptment to upstream exploration and production companies in the oil and gas/energy sector.  Thalassa Holdings Ltd operates in the energy services industry. We all know the aftermath of the effects of the fall in oil prices. Bankruptcies and more on the way perhaps. In Thalassa’s report,I pounced upon a list of companies and their total indebtedness, either secured or unsecured. This is that list.

This is a list of the indebtedness of some companies within the oil and gas/energy sector. You may want to do further research on them.

While that picture looks grim, a question is whether we can find pickings within the industry that makes sense? In a sense, if oil prices pick up, there will be knock on effects industry wide. But we are not even predicting the price of oil here as investors. That is quite beyond me and quite frankly, unknowable. All we are asking is that which companies in the oil and gas sector stand a high chance of survival. For if it can survive a downturn, it can thrive again. That is very much my way of thinking. Take care of the downside and the upside will take care of itself.

We all know that the oil and gas sector to be in the midst of a recovery. With the price of oil going to a low of mid 20’s and the recovering to the mid 50’s , I have gone on record to say that many companies within the sector are awaiting bankruptcy but to those with a conservative capital structure, now is the time to pick some of them up. If not now, then when?

A classic example is my accidental discovery, Thalassa Holdings, a company listed on AIM in the UK. Located far away from my home country, the company caught my eye when I read its annual reports. In fact, the chairman, Duncan Soukup, has a very similar disposition and outwardly character to people I know. His words seem all too familiar to me. He wrote his annual report in a way which was speckled with anecdotes and the events of our time. From what I can infer, I see a fairly conservative and opportunistic guy at work here. I have to say that I enjoyed reading his annual reports. So this caught my eye in a huge way.

The numbers from the balance sheet looked decent to me. There were 12 million of impairments in 2014 and another 13 million of impairments in 2015.  Without the impairments, the company would have performed better in 2015.

Profitability numbers, to put bluntly, were not great. But 1st half results looked ok for 2016 . There was a sharp fall in revenues compared to the period prior. That also partly explains the low price on the company.

Revenues came in at $US5.2 million. Gross margins were higher at 56.7% versus 42.2% for the period prior. Earnings for the 6 month period were positive. In fact , on a fully diluted eps basis, the earnings per share for Thalassa Holdings was US$0.03 . The book value however has fallen quite drastically, due to impairments and writeoffs.

Criticisms Of Management

Of course, there were criticisms of Duncan mismanaging the company. In fact, as we speak now, cash is being used now on various acquisitions which may or may not pan out. No company is perfect after all. While cash is dissipated on other assets, investors often wonder why the company refuses to give the excess cash back to shareholders. The reason is simple. The managers of the company often feel that they know better than outsiders that they know what they are doing. The job of management is to maximise intrinsic value for the shareholders. We could make the argument that spending the money on these acquisitions can prove wasteful. Management on the other hand, may believe that they are increasing earnings per share 5 years down the road. Who is right then? If management is truly acting in the shareholders interest, then they should make every stand that they are doing the right thing and show some visibility into their actions. So the onus is on management to be communicative in their plans to shareholders. Shareholders can also assess the decisions of management to check if their policies have panned out for the company. And as shareholders we must let ourselves be heard by management. Afterall, the company belongs to shareholders isn`t it?

If this company interest you, do have a look at its annual reports. There is always something to learn from these reports. And if one reads widely, one can get very high level advice from C – level officers which help to make one become a better investor.

I have written quite a bit on the happenings  of the industry, what to be wary of and the kind of opportunities which we can seek out as investors. I would like to take this opportune moment to point out some of the articles I have written prior to this one. You can read:

EZRA EZRA , No Longer The Bella Of Dreams

Oil Prices Are Recovering, Upstream Operators Are Still In Agony But Pockets Of Opportunity Avail

Swiber Holdings : Case Study Of A Failure

When we discovered this company, its market capitalisation was 9.49 million. Today, its market capitalisation is 13.57 million.  I leave you with a well deserved quote after reading this far. “Opportunities are like sunrises. If you wait too long, you will miss them.”


I have been an investor for 15 years now and my journey has meandered from Warren Buffett to Ben Graham. My start, like many, really was the naive idea that Buffett's skills could be replicated in some fashion. I was proven wrong when some of the supposed stock picks that I chose had dismal performances. Then, I learnt that it is no point trying to be someone I am not. Gradually, through failure and some success in deep value investing, my approach towards stocks gradually shifted to an approach based around Graham's techniques. So, I give credit where credit is due and to Ben Graham, I and many other investors around the world, owe him a great deal. So, if you want to read up on biographies, read about Ben Graham. His seminal work, Security Analysis is a gem. My books are just rich interpretations of what he has taught.

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