Tidewater: Post-Bankruptcy, Well-Capitalized Leader at Discount

Amit Wadhwaney of Moerus Capital Management presented his in-depth investment thesis on Tidewater (US: TDW) at Best Ideas 2019.

Thesis Summary:

Tidewater is one of the largest provider of offshore supply vehicles (“OSV”) and marine support services to the offshore energy exploration, development and production industry. The company’s OSVs tow and anchor-handle mobile drilling rigs and equipment, transport supplies and personnel and provide support to pipe laying and other offshore construction activities. Revenues relates directly to offshore activity in the exploration and production of hydrocarbons, notably oil.

Following the collapse in oil prices in 2014 and the resurgence of lower-cost, unconventional sources of oil (notably shale), there was a significant drop-off in the higher-cost offshore exploration activity, with the resulting collapse in demand for OSVs and other support services plunging most companies in this industry into various degrees of distress.

Tidewater emerged from bankruptcy with much of the previous debt converted to equity (or warrants), resulting in a greatly improved balance sheet, with the assets marked down to the recent depressed valuations in the market.

At recent prices, Tidewater trades at a discount of at least 30-40% to a depressed book value that reflects write-downs of asset values on the order of 70+%. This situation is unlikely to persist in the long run as the company’s more financially leveraged competitors withdraw vessels from the market and/or consolidation among industry participants diminishes the number of viable competitors, improving the supply-demand balance and pricing dynamics in the market for Tidewater’s services.

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About the instructor:

Amit Wadhwaney is a Portfolio Manager and Co-Founding Partner at Moerus Capital Management LLC, and the founding manager of the Moerus Worldwide Value Fund. Mr. Wadhwaney has over 25 years of experience researching and analyzing investment opportunities in developed, emerging, and frontier markets worldwide, and has managed global investment portfolios since 1996. Prior to founding Moerus, Mr. Wadhwaney was a Portfolio Manager and Partner at Third Avenue Management LLC. Mr. Wadhwaney founded the international business at Third Avenue and was the founding manager of the Third Avenue Global Value Fund, LP, the Third Avenue Emerging Markets Fund, LP, and the Third Avenue International Value Fund, an open end mutual fund. Earlier in his career, Mr. Wadhwaney was first a securities analyst, and then Director of Research at M.J. Whitman LLC, a New York-based broker-dealer. Prior to joining M.J. Whitman, Mr. Wadhwaney was a paper and forest products analyst at Bunting Warburg, a Canadian brokerage firm. He began his career at Domtar, a Canadian forest products company. Mr. Wadhwaney holds an M.B.A. in Finance from The University of Chicago. He also holds a B.A. with honors and an M.A. in Economics from Concordia University; at Concordia, he was awarded the Sun Life Prize and the Concordia University Fellow in Economics, and he subsequently taught economics classes there. He also holds B.S. degrees in Chemical Engineering and Mathematics from the University of Minnesota.