Sunday, November 18, 2012

Another Value Blogger Writes About Conrad ($CNRD)

He notes,

"Oil/gas exploration at the Gulf is recovering but not in full swing yet. While revenues from oil/gas industry has improved to 12% of its total revenues, it's still far below the 27% before the oil spill or 40%+ before the GFC. Gross margin from its repairing and maintenance segment has improved to 15%, but is not yet back to long-term average of 20-25%. When oil/gas operations in the region are back in full force, there will be a continuous supply of repairing/maintenance work. But vessels which have just been moved into the Gulf won't need maintenance immediately. There will be a time lag."
Yes. I think that we are in the mid-stages of the inland barge cycle, and the very early stages of a GOM capex recovery. At a 2.4x EBIDA multiple, if Conrad can maintain the ttm EBITDA for 29 months it earns back the entire current enterprise value.

1 comment:

wildcat said...

I think it is probably more realistic to look at the previous level of absolute revenue from the offshore oil and gas industry rather than the percentage of revenues that this segment contributes.

The amount of revenue from new builds, driven by demand for barges, is much higher than the previous level.

I'm not sure how to quantify the capacity for repairs and modifications on the Gulf coast, but there could be more capacity now than there was when margins for this segment previously peaked. Margins should move in the same direction as revenues for the repair segment, but I don't think they will rise significantly until we see some tightening of capacity